No.
Your cost basis in the home is your original purchase price plus any improvements you have made to the home that have a useful life of more than one year,’’ said Brian Kazanchy, a certified financial planner with RegentAtlantic Capital in Morristown. ‘‘Your furniture package purchase is not part of your cost basis.’’
Some examples of capital improvements that would qualify as an increase in cost basis include the cost of putting an addition on the home, replacing the whole roof, installing central air-conditioning, paving the driveway or rewiring the home, Kazanchy said.
In other words: The stuff you can’t take with you.
When selling your home, he said you need to separate the sale of the home and the sale of the furniture in the home. For example, you could sell the home for $240,000 and sell the furniture for $10,000. In this scenario, your gain on the home would be $240,000 minus your $80,000 cost basis minus any improvements with a useful life of more than one year, he said.
The sale of furniture is separate from the home sale and any gains received upon this sale must be reported as income on Form 1099-S.
Adding the furniture to the cost basis is only asking for trouble, said Douglas Duerr, a certified financial planner and certified public accountant with U.S. Financial Advisors in Montville.
‘‘Furniture is not technically part of the actual home being sold,’’ he said. ‘‘You also can physically take it with you, so I would not include it in your cost basis like you would repairs and improvements.’’
To read more about what can be counted as a capital improvement, read IRS Publication 523 at irs.gov.
