Renovations... now taxes... Repair vs. Capital Improvement

I recently completed a renovation and had my accountant begin the process of submitting my taxes. We had the discussion of repairs vs. capital improvements and I trust his judgement but wish to have others provide me w/ their opinion. We performed a kitchen and living room renovations. During the renovation we performed some tasks (e.g., sistering joist, new 2×4 on some parts of the wall, new plumbing pipes etc.). He says these are capital improvements. I am not sure I agree. I can provide additional details later. Gotta run!

someonecalleddob

in Taxes 11 years and 2 months ago

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Putnamdenizen | 11 years and 2 months ago

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Greenmountain: are you okay? You seem to be giving increasingly disjointed answers. I understood your previous screeds against people using unlicensed contractors, but now your answers are just, well, weird. Do you realize they are kind of incomprehensible?

hawaiismurf | 11 years and 2 months ago

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Nevermind my previous question, I found Publication 862. Is the way this works generally – on Capital Improvements, one does not pay sales tax, but the value of the capital improvements has to be declared by affidavit and is used to re-assess property value for property tax purposes? While repairs are assessed sales tax on purchase, but are not part of the renovation cost affidavit that affects property tax?

hawaiismurf | 11 years and 2 months ago

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what is the relevant instruction form, etc. for one to get familiarized with the categorization of capital improvements and expenses?

greenmountain | 11 years and 2 months ago

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Dave is correct. But, some types of work are confusing, and for more details, read the instructions, especially if you need to consult the likes of us when you already have an accountant. When is vinyl tile a capital improvement? Is it like a paint job, or like ceramic tile? You may be able to capitalize some things you thought were maintenance, and not other things you thought were renovations.

brucef | 11 years and 2 months ago

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The only portion that can be capitalized, but not as leasehold improvements, would be certain categories, such as appliances (7 years). This assumes rental property. Your own appliances are neither capital improvements nor expensible. Similarly, for DOB permit fees, many items like kitchen cabinetry are not considered construction, and can be backed out of calculations for job expense.

someonecalleddob | 11 years and 2 months ago

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thanks. we did use a licensed contractor, had a contract, etc. we’re happy with the work and thanks again for the feedback!

daveinbedstuy | 11 years and 2 months ago

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All of those expenses you enumerated would be capitalized into the cost basis of the house. basic repairs are expensed.

greenmountain | 11 years and 2 months ago

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Read the back of NYS ST124\. These are the instructions for a capital improvement certificate, which you fill out and give to your contractor. In case of a sales tax audit, your contractor would produce your signed form. But, if you did not hire a licensed contractor who files sales tax returns, you may not have seen this. Now go put your sister back in her crypt. I lost a homonym, but found a protein.

someonecalleddob | 11 years and 2 months ago

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i dont understand whats cryptic. anyhow if you can add value to the post, i welcome that. thank you

greenmountain | 11 years and 2 months ago

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On October 2, 2013 at 2:45 PM, this same guy wrote on Brownstoner: “I randomly went to the NYC DOB website and searched my address. I noticed that there was an open complaint from last week. The caller stated that there is digging going on in backyard to create a door and beams are being replaced. This is not accurate.” That’s right. He wrote it on October 2, not October 31\. Criptic!