I had to rent a house while my primary residence was being completely remodeled. Can I add rental costs to my basis?

[jimacker46]

I moved out of my principal residence for 13 months while it was being remodeled.  During this time I paid rent that I otherwise would not have needed except for the remodel.   I lived in the remodeled house for 10 years and just sold it.  Can I add the costs of rent to my basis?  

[DS30 · Accepted solution]

Unfortunately no. The IRS will not allow you to include the rent you had to pay to rent a home while remodeling your primary residence for sale as an increase in the basis of the home sold. These expense would be considered personal expenses and are neither tax deductible or include in the home basis.

Also, you do not need to enter the sale of your primary residence if:

• You never used your primary residence as a rental or took a home office expense
• You have a loss on the sale of your home (Personal capital losses are not reported on your tax return)
• You did not receive a Form 1099-S and
• You meet the home gain exclusion (see below)

You can take the gain exclusion as long as you considered the home your "primary residence" for 2 of the last 5 years. If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse. See  Sale of Your Home for more information on the exclusion.

If you still need to enter your sale of your primary residence (which may require an upgrade in TurboTax), please follow these steps:

1. Once you are in your tax return (for TurboTax Online sign-in, click Here), click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Less Common Income”
5. Choose “Sale of Home (gain or loss)” and select “start’
6. You will want to use the "Easy Guide" to determine the adjusted basis on this home 

Say "yes" that you sold your main home and TurboTax will guide you on entering this information.  You will need:

• The date you sold your home and the selling price (from your closing statement)
• The date you bought your home and the purchase price (from your closing statement)
• The cost of any major improvements you made, so we can deduct them for you
• Form 1099-C if you sold your home at a loss (short sale)

Just remember to check the box to have your home sale reported on your tax return but ONLY if you receive a 1099-S