Capital improvements on second home.

[nick7920]

Purchased a second home in April, 2019.  Sold the second home in April, 2023.  Upgraded 12 windows, added a double carport, and renovated a large deck.  Are these considered capital improvements, and can I deduct them from the sale price to lower my capital gains?  I received a 1099-S only showing the gross proceeds.  Would I need to complete IRS Form 8949? If so, how should the improvements be annotated? 

[Vanessa A]

Yes, windows and a carport would be a capital improvement.  The deck renovation would be a capital improvement if it was not normal maintenance, but increased the useful life of the deck such as replacing all the boards or turning it into a sunroom. If you simply painted the deck and replaced a rotted board that would not be a capital improvement.

For the things that qualify as capital improvements, yes, they would lower your capital gains as they would be added to the cost basis of your home. 

Yes, you would complete form 8949 with your return. To complete this form you will select the following in TurboTax:

• Federal
• Income
• Show More next to Investment Income
• Start next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) 
• Select Other
• Continue through and select Other again for the type of investment
• Select second home
• Answer how you obtained the house
• You will need to enter the selling price, dates and the cost basis of the house (this is where you will add the capital improvements to the purchase price of the house)

[TomD8]

Page 9 of IRS Publication 523 has a list of typical capital improvements:

https://www.irs.gov/pub/irs-pdf/p523.pdf

[nick7920]

I input the proceeds from the sale of the second home along with the total adjustments regarding the capital improvements into the total amount paid.   Do I need to explain (show evidence) of each capital improvement and the amount paid for each improvement?  If so, how do I put that in TurboTax and get it on the 8949.  If I add the capital improvements to the purchase price (which I did), it won't match the 1099-B, which your program says it should match.  Will it create an issue with the IRS?

I don't see where TurboTax allows me to annotate each capital improvement and the amount of the adjustment.  I attempted to annotate the 8949, but had to use the override feature, which indicates an error on the form and restricts me from submitting electronically.  So I redid the form and I'm back to the beginning regarding this capital gain.

[TomD8]

Details from each capital improvement to a second home are not entered on your tax return.  Just keep that information with your own records.

TurboTax has a help article on how to enter the sale of a second home:

Where do I enter the sale of a second home, an inherited home, or land on my 2023 taxes? (intuit.com...