Capital gains and original cost of home after it's been refinanced?

[cheryl641]

Trying to figure out if I owe capital gains.  Sold property 8/2016.  Bought it in 2003 but it has been refinanced several times.  What then is original cost?

[Texas Roger · Accepted solution]

Original cost is what you paid for it in 2003. You may be able to make adjustments to the basis from certain expenses incurred with the refinancing. Was this your main home?

[cheryl641]

Yes, it was my main home.  What if I do not have receipts for upgrades from 10 years ago.  Such as tile, carpet, paint etc?

[Texas Roger]

Most of the things on your list do not affect the basis. See this IRS Pub: <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p523.pdf">https://www.irs.gov/pub/irs-pdf/p523.pdf</a>

[LisaB1]

What if the house was a rental?  Purchased in 2005, refinanced in 2012, rented from late 2012 to 2017, then sold?  What price would I use to determine cost basis? Thanks!

[TaxGuyBill]

@LisaB   "Cost Basis", is your cost.  That is the purchase price plus cost of improvements.  However, was the Fair Market Value of the property in 2012 (when it was converted to a rental) MORE or LESS than the Cost Basis at that time?

If it was LESS, it gets more complicated.  It would help if you gave the approximate numbers for the (1) cost (purchase price plus cost of improvements), (2) Fair Market Value in 2012, (3) depreciation taken and (4) sales price (after selling expenses).

[LisaB1]

Thank you. (1) purchase price $215,000, purchase costs $4,000, improvements pre-rental $2,000, improvements during rental $12,000 (2) FMV house $128,000, land $64,000 (3) depreciation taken $25,000 (4) sales price $212,000, credit to buyer at closing $7,000, selling expenses $24,000. I used the FMV of $128,000 for depreciation. Thinking I would handle as a sale of Business Property? Not rental bc sold at less than purchased and more than FMV?

[cinthia800]

What if I do not have hard copies of receipts from renovations 20 years ago like swimming pool and garage additions, kitchen renovations and much more.

[WendyN2]

You can deduct any home improvements that you can prove. You don't necessarily need receipts; photos, contracts, statements from contractors, or affidavits from neighbors, may be enough to convince the IRS that you actually did work. Please note that swimming pools are a bit tricky:

Real estate experts estimate that an average 14x28-foot inground concrete pool potentially adds 5 to 8 percent to the real estate value of your home. If your property is worth $400,000, you'll realize a boost to the value of your property of about $20,000 to $32,000.

This was their "take" and approach for adding improvements to the original cost basis upon sale of a residence. Anything else should be a good faith best and closest accuracy estimate of cost when the costs were incurred.