Four Steps to Saving Taxes on Selling a House in the US: Step Two

Four Steps to Saving Taxes on Selling a House in the US: Step Two - "Capital Improvement"

Step Two: Capital Improvement

Simply say, adding the cost of renovations and garden improvements to the house's cost. This reduces the profit margin on the sale and can be used to offset taxes.

Examples:

Roof renovations, Kitchen and Bathroom Remodeling, Replacing Central Air Conditioning, Replacing Flooring or Carpet, Adding Rooms or Extensions, Replacing all Windows, Installing Solar Panels, Digging a Swimming Pool, etc.—basically, major upgrades.

Please be noted that minor repairs don't count! For example, painting walls, fixing plumbing, replacing parts, replacing refrigerators, light bulbs, and faucets don't count!

If you're single and bought a house for $500,000, but you:

• replaced the roof for $10,000

• renovated the bathroom for $20,000

• renovated the kitchen for $20,000

A total of $50,000

Then the cost of your house is $500,000 plus the $50,000 spent on renovations, equaling $550,000 to become the total cost of your house. You sold the house for $800,000. So the profit is 250,000. If you're single, you have a tax-free allowance of $250,000, which you can use up all tax-free allowance and without paying taxes.

Step 3 & 4 is coming.....stay tuned!