Home repair

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pattK
pattK Member Newcomer

Had to replace septic lines and whole system. How can I claim those expenses?

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  • KristineS
    KristineS FreeTaxUSA Agent
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    Hi pattK,

    Great questions, thanks for writing in.

    If these expenses are for your personal residence, the replacement costs are not expenses to claim. The improvement will add long-term value to your home and the expense increases the basis or value of the home when/if you ever decide to sell the home.

    If however, these expenses are related to a rental property, they would be considered an improvement. You must capitalize any expense you pay to improve your rental property. See Table 1-1 in IRS Publication 527 for examples of improvements. Typcially a capital expense is depreciated over a set period of time. FreeTaxUSA software will guide you through the steps of depreciation this improvement if related to rental property.

  • Henry
    Henry FreeTaxUSA Agent
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    Hi pattK! Were these repairs done to your main home? If so, upgrades and maintenance to your personal residence are not generally deductible. However, you'll want to keep a record of those expenses because they may be able to help you reduce your capital gains taxes when you eventually sell your home.

    When you sell your home, you'll need to report your cost basis, which is basically the amount of money that you have put into the home (your original purchase price plus the cost of any improvements that substantially add to the value of your home, increase its useful life, or adapt it to new uses). The difference between your cost basis and the sales price of the home will be your gain, so the higher your cost basis is, the less gain you will have to report.

    You can refer to IRS Publication 523 for more information on how to determine the cost basis of your home (starting on pg 8).

    Also, keep in mind that if you do have a capital gain from the sale of your main home, you may be able to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Our software will help you determine that when the time comes. There is a 'Sale of Main Home' option under the Income section.