My and sister had repairs done on a house they sold. Can they divide the single receipts for repairs? They will not be filling tax returns jointly with each other.

[artboy56]

Each will file with spouses

[DoninGA]

If this was a personal residence and not a rental or a business property then repair costs cannot be claimed on a tax return when the property is sold.

[Opus 17]

There is a a difference between improvements and repairs.  Improvements (also called betterments) add value to the property, extend the useful life of the property, or adapt it to a new use.  Repairs maintain the property in its current condition, or restore it to as-was condition.  

For personal property, expenses like repairs, maintenance, insurance and utilities are never deductible.  Improvements add to the adjusted cost basis, which reduces capital gains tax (that's how you get tax savings from improvements).   If the home has two owners, they can each report half the sales proceeds and subtract half the adjusted cost basis. 

If they are in the business of flipping houses, the business can deduct costs like utilities, insurance and repairs. Improvements are added to the cost basis and reduce the capital gains in the usual way.  However, a business must file a partnership tax return first, before the partners can split anything.  That requires a special form, a special version of turbotax, and has an earlier deadline.

Do you want to tell us more?  Was this personal or business?  How did they acquire the home?

[tagteam]

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@Opus 17 wrote:

If they are in the business of flipping houses, the business can deduct costs like utilities, insurance and repairs. Improvements are added to the cost basis and reduce the capital gains in the usual way. 

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Just so this is clear, those in the business of flipping houses are considered to be real estate dealers by the IRS.

As such, capital gains do not enter the matrix when the houses are sold as the property and any improvements are considered to be inventory, not capital assets.

[artboy56]

It was their mothers house. Left to them in trust. After a whole house inspection needed repairs were noted that would bring the house back. New septic system, roof repairs, wood rot and yard sprinkler issues. For over a year repairs were made and the sisters paid utilities and insurance.

the house was sold and money was divided equally.

question is can they both claim half of the repair bills on their own taxes. They are not filling jointly.

thank you for your expertise 

[Opus 17]

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@artboy56 wrote:

It was their mothers house. Left to them in trust. After a whole house inspection needed repairs were noted that would bring the house back. New septic system, roof repairs, wood rot and yard sprinkler issues. For over a year repairs were made and the sisters paid utilities and insurance.

the house was sold and money was divided equally.

question is can they both claim half of the repair bills on their own taxes. They are not filling jointly.

thank you for your expertise 

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Once again, you have to separate improvements from repairs.  See the definition above.   

Repairs are not deductible or adjustments to anything, they are just part of responsible home ownership.  Improvements add to the cost basis.  A new septic system would be an improvement.  Wood rot, sprinkler issues and roof repairs are too non-specific, they might be repairs or improvements, depending on the intention and scope of the work.  They need to determine that themselves.   Please read publication 523.

https://www.irs.gov/forms-pubs/about-publication-523

You need to start with the fair market value on the date the previous owner died.  That may require a real estate appraisal if you did not get one 2 years ago.  (An appraiser can make a retroactive appraisal, but be sure to let them know the condition of the property at the time so it is fair.)  Suppose the fair market value was $200,000.  Each half-owner has a basis of $100,000.  Then, suppose that of all the costs that were paid, the improvements totaled $50,000.  That's $25,000 per owner, so each owner now has a basis of $125,000.

Then suppose the home sells for $300,000.  You can subtract the real estate commission, so your proceeds might be $284,000.  That's $142,000 per owner.  On each owner's tax return, they list the sale of an asset ("other property"--don't use "sale of my home" unless they lived there as their main for home for at least 2 years of the past 5 years.)   With a proceeds of $142,000 and adjusted basis of $125,000 in this example, each sister has a taxable capital gain of $17,000.

The more items you can add to the basis, the less taxable profit they will have.  But you can only add improvements, and certain closing costs listed in publication 523.  You can't include repairs, or utilities, or other carrying costs they might have had during the time they were fixing it up. 

And yes, if they own equal shares, they each get a basis adjustment for half the cost of improvements, even if there is only one bill. (They should each keep a copy of everything in case of audit.)