Capital gains on sale of 2nd home

[Ronstar]

DW wants me to round up my tax info and get it to the cpa Monday. We sold our snowbird condo in 2019, and I anticipate paying tax on the capital gain.

I’m just starting to research this, and it’s been almost 30 years since I sold a house that wasn’t our primary residence.

I assume that closing costs and realtors fees are subtracted from the gross gain to get to the net gain.

But what else can be subtracted? I assume the cost of improvements such as carpeting, hardwood floors, plantation shutters? can be subtracted. We also bought new appliances that were sold with the condo. Wondering if the cost of these could be subtracted from the gain as well.

Anyone have any other ideas? I just don’t want to go talk to the cpa unprepared.

 

[Sunset]

I believe all the improvements [-]and the new appliances add to your basis (so less profit)[/-]. And the closing costs and realtor fees are subtracted from the sale, so again less profit.

Did you rent the place ?

 

[MichaelB]

But what else can be subtracted? I assume the cost of improvements such as carpeting, hardwood floors, plantation shutters? can be subtracted.

Yes to these

We also bought new appliances that were sold with the condo. Wondering if the cost of these could be subtracted from the gain as well.

Sorry, appliances are not considered capital improvements and don't add to the cost basis.

 

[Ronstar]

I believe all the improvements and the new appliances add to your basis (so less profit). And the closing costs and realtor fees are subtracted from the sale, so again less profit.

Did you rent the place ?

Nope - never rented the place

 

[Sunset]

....
Sorry, appliances are not considered capital improvements and don't add to the cost basis.

I had to look it up, and you are correct. Unless they are built in appliances.

 

[statsman]

Sorry, appliances are not considered capital improvements and don't add to the cost basis.

Not even built-in appliances (in-wall ovens or dishwashers, countertop stoves)?

 

[pb4uski]

... Sorry, appliances are not considered capital improvements and don't add to the cost basis.

I think it depends. In many markets, the sales price includes not only the land and building, but also certain appliances that will stay and they are frequently spelled out in detail in the listing and in the purchase and sales contract. If appliances are included in the sales contract (and therefore in the sales price) then IMO the cost of the appliances included in the sale can also be included in calculating the gain.

While they are not part of the basis of the home, they are part of the basis of what was sold.

ETA: Technically, I think you are supposed to exclude the amount received for personal property, which would include appliances that are not built-in and report those sales on Schedule D. In my experience, it is difficult to do that because the amount of the sale price relating to appliances is usually not bifurcated in the sales contract. Accordingly, the most practical approach is to simply include the cost of appliances in basis rather than make some sort of arbitrary allocation of purchase price. For a second home, the net impact woud be the same since capital gains on the house sale and on personal property sales would both be subject to capital gains rates. I woudll much rather defend including the cost of appliances in basis than defend some arbitrary allocation of the sale price between real and personal property.

 

[pb4uski]

Not even built-in appliances (in-wall ovens or dishwashers, countertop stoves)?

Built-in applances are specifically includable. Publication 523, page 9. https://www.irs.gov/pub/irs-pdf/p523.pdf

 

[JP.mpls]

Ronstar,
Thanks for your post. I'm in the process of buying my first second home (a snowbird townhome in Florida), and I never even thought about the tax rules when it comes time to sell.

I will start keeping track of improvements.
Have no plans to rent it.

Are you willing to comment on why you are selling? As a rookie, I'm hoping this is a good move for me.

Take care, JP

 

[Ronstar]

Ronstar,
Thanks for your post. I'm in the process of buying my first second home (a snowbird townhome in Florida), and I never even thought about the tax rules when it comes time to sell.

I will start keeping track of improvements.
Have no plans to rent it.

Are you willing to comment on why you are selling? As a rookie, I'm hoping this is a good move for me.

Take care, JP

We sold because we intended to move to Arizona full time, and we were looking for a bigger place. Our snowbird condo only had a one car garage, and we also needed to climb stairs to get to our living space.

But family issues have since interfered, and we are grounded in Illinois for a while.