Does the cost basis of a second home include the costs spent on improvements to the home such as (new roof, new deck, etc)?

[rmtrimble22]

Sold a second home that was not a rental property or inherited. Trying to determine if capital improvements can be deducted from the cost basis for capital gains. If so, is there a list of example improvements that can be deducted.

[Opus 17]

Capital improvements can be added to the cost basis of any asset, including a second home.

An improvement is something that extends the useful life of the asset or increases its value, in contrast to a repair which restores the asset to its previous value or condition.  Improvements can include kitchen upgrades, new roof, new carpet, fixtures, and other things that become permanent parts of the property.  (Not appliances, for instance.)  The improvement must still be with the property when you sell; if you owned the house for 30 years and replaced the roof twice, only the second job adds to the value, the first does not since it was removed.  Likewise carpets, windows, fixtures, etc.   Some work may have both repair and improvement aspects.  For example, if a tree branch falls through your roof, and you decide to replace the entire roof due to its age, part of the cost must be allocated to the repair of the storm damage, before you can count the rest as a capital improvement.  

[dianecarver41]

When you inherit a home, TurboTax asks for FMV when you inherited it. If you add capital improvements later - where is that information added in TT?

[Opus 17]

You may have to use that as the FMV.  Turbotax should really ask for the "cost basis" of any asset, but because not all taxpayers understand the rules, Turbotax asks other things and doesn't always follow up.  If they don't give you a place to add adjustments to the cost basis, then use the adjusted cost basis (FMV plus improvements) when it asks for FMV.

[dianecarver41]

Thanks - this makes sense.

[billtepper]

Finally an answer!! Great