Investors & landlords
Painting is not an improvement, it is a repair. It is not added to the basis of the property. Carpeting can be.
You would report the Sale of a Second Home in the Investment Section, as other.
You add the cost of capital improvements to your tax basis in the house. Your tax basis is the amount you'll subtract from the sales price to determine the amount of your profit. A capital improvement is something that adds value to your home, prolongs its life, or adapts it to new uses.
There's no laundry list of what qualifies, but you can be sure you'll be able to add the cost of an addition to the house, a swimming pool, a new roof or a new central air-conditioning system. It's not restricted to big-ticket items, though. Adding an extra water heater counts, as does adding storm windows, an intercom, or a home security system. (Certain energy-saving home improvements can also yield tax credits at the time you make them.)
Here are some more capital improvements:
- Remodels and room additions (including decks and porches)
- New or upgraded landscaping, irrigation, sprinkler system
- Hardscape such as pavement, block or retaining wall, patio
- Fencing
- Swimming pool, spa
- Storm windows, doors
- New roof
- Central vacuum or security system
- Upgraded wiring, plumbing, ductwork
- Central heating, AC, humidifier
- New furnace, water heater
- Filtration, soft-water, or septic system
- Built-in appliances
- New flooring or wall-to-wall carpeting
- Upgraded insulation
- Satellite dish
The cost of repairs, on the other hand, is not added to your basis. Fixing a gutter, painting a room, or replacing a window pane are examples of repairs rather than improvements.
Repairs are a deductible expense in the year paid for a rental, but unfortunately, never deductible for your personal home.
