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Level 2

# Calculating basis of my primary residence - records and owner supplied labor

I'm trying to calculate the basis of my home that I have lived in for 30+ years.  I have good records for some improvements, such as a recent major master bath remodel.  For some earlier projects, I kept a running tally of expenses on a spreadsheet - with vendor names, dates, and costs - but in many cases I don't have paper receipts, and expenses were too long ago to produce credit card statements, etc.  Is the tally of expenses enough to justify these expenses?

Additionally, I added crown molding in much of the house - supplying most of the labor myself.  I know that in general I likely can only count the cost of the materials and not the value of my labor.  However, I did need to purchase tools to do the job and wonder if I can include that cost as well as the cost of the materials.  Tools and materials will still add up to less than a third what professional installation would have cost.

Accepted Solutions
Level 11

## Calculating basis of my primary residence - records and owner supplied labor

@bensanford wrote:

Is the tally of expenses enough to justify these expenses?

However, I did need to purchase tools to do the job and wonder if I can include that cost

In most cases, yes.

Maybe.  If you used the tools for job and never used them again for anything else, yes.  If you use the tools for the job and then regularly used them for other things, probably not.  If it is somewhere between that, then maybe a portion can be used.

In the event you are calculating your Basis to calculate the gain from the sale of the home, in some cases it might not matter.  If it has always been your main home you may be able to "exclude" (not pay tax on) up to \$250,000 (\$500,000 if Married Filing Jointly) of the gain.

3 Replies
Level 11

## Calculating basis of my primary residence - records and owner supplied labor

@bensanford wrote:

Is the tally of expenses enough to justify these expenses?

However, I did need to purchase tools to do the job and wonder if I can include that cost

In most cases, yes.

Maybe.  If you used the tools for job and never used them again for anything else, yes.  If you use the tools for the job and then regularly used them for other things, probably not.  If it is somewhere between that, then maybe a portion can be used.

In the event you are calculating your Basis to calculate the gain from the sale of the home, in some cases it might not matter.  If it has always been your main home you may be able to "exclude" (not pay tax on) up to \$250,000 (\$500,000 if Married Filing Jointly) of the gain.

Level 2

## Calculating basis of my primary residence - records and owner supplied labor

But I also still am unsure how much detail the IRS might want for documentation of improvements.   Some projects where I paid a contractor and had a contract are will documented.  But other smaller projects - some of which go back 30 years, are things that I don't have every cancelled check or credit card receipt, and it is impossible to resurrect those records from so long ago.  I a running tally of expensed, with dates and vendors sufficient?

Level 15

## Calculating basis of my primary residence - records and owner supplied labor

I a running tally of expensed, with dates and vendors sufficient?

In many cases, yes. The documentation only comes into play if the IRS has cause to audit you on it. Typically, they only have cause if they have a reasonable suspicion of intentional criminal fraud to defraud the IRS.  I've only heard of things like that happening to the likes of Al Capone.

Keep in mind also that if the property was your primary residence for at least 2 of the last 5 years you owned it, counting back from the closing date of the sale, then you will qualify for the capital gains tax exclusion.

If you are single then the first \$250K of gain is tax free. If you are married, filing joint, and both you and your spouse lived in the house as your primary residence for 2 of last 5 years, then the first \$500K of the gain is tax free.

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