Calculating home improvments

[Maj92az]

I have a primary residence I've had for only 6 months. I am under contract to sell with (after selling fees) a profit of $26K. I had no idea we were moving so we put some money into the home. I can not claim any of the exclusions...just deductions on my improvements.

How do I calculate that? I personally did all my own work. This includes floors. I have spent $2000 for flooring but in the fair market this $2000 (and my labor) would be much higher to have done. Maybe close to $10K. I have multiple renovations that I saved on by having myself complete. How to I determine an amount to use as a deduction. I guarantee the costs to accomplish what I did in my home (by another contractor) would exceed $26K. 

[Critter-3]

Purchase price + cost to buy + improvements (your sweat equity isn't allowed)  + cost to sell =  cost basis 

Selling price - cost basis = taxable profit or non deductible loss 

You may be eligible for a partial exclusion on any gains from the sale of the home if you owned and lived in the home for less than two years.

Go to IRS Publication 523 Selling Your Home on page 6 - https://www.irs.gov/pub/irs-pdf/p523.pdf#page=6

[Maj92az]

Thank you. 

The reason I mentioned I can claim any exclusion is we already will be claiming it for 2021. We sold a home in January that we also had just less than 2 years. There was 120K profit. So here we are again selling another primary home in 2021. 

Not proud of it..

But ok thats a shame I can't deduct my "sweat". Even though it was the materials and labor that lead to the profit. Had I hired a contractor and paid him- the amount would certainly been deductible?? Not that I will go there..but what if someone owned a remodeling business..and did their own work? Hmm 

[Critter-3]

Sorry ... but the rule is only one home exclusion in a 2 year period so you pay the cap gains on this one. 

And think of it this way ... you only have to pay short term cap gains taxes on the profit and not also FICA/SE taxes like you would if you were in the business of remodeling/flipping or the contractor you could have paid.  That is just the way it is.  

[Maj92az]

Ok thanks. Yes I read through (523 I think..) and am aware I can only claim the exclusion on one home in a 2 year period. We originally moved for a job which resulted in the larger profit. I will happily pay my fair share on this home- just checking. I suspect my taxes will get confusing when I enter i sold two homes- one being excluded. And another with minor deductions. 

Thanks. 

[Mike9241]

if someone owned a remodeling business then if they "charged" for their services then the business would have income. the would create tax consequences for both the owner and the business may SE tax, higher income taxes.    really no different than say a plumber or electrician making repairs to their home.  my guess is they wouldn't charge for their labor since that would increase business income with no offsetting deduction for the labor portion of the repairs. now improvements might be a different story depending on how taxes work out.