Can the cost of storing furniture while a house is being prepared for sale be considered a selling expense?

[jgeorges45]

My wife and I sold our house last year. About two months before the sale, and on the recommendation of our real estate agent, we moved all of our furniture to storage so that the house could be re-carpeted and re-painted  throughout the inside, and then staged with temporary furniture brought in by a staging company. Our furniture was in storage for two months or so. Can that storage cost be considered a selling cost? We were living in an apartment during this time and I understand that our temporary apartment rental would not be a selling cost. But without moving our furniture into storage, the house could not have been made as attractive to potential buyers, or so our real estate agent argued.

[Opus 17]

No.  The cost of staging is an allowable expense (advertising) as long as no permanent changes were made to the home.  (If staging included painting or small repairs, those expenses are not allowable.)  Moving out your old furniture might be allowable, but I'm on the fence.  It sounds like a personal moving expense.  But the cost of storing it because your new place wasn't ready, is definitely not allowable as an expense of advertising your home for sale. 

[Vanessa A]

Yes, the storage costs for your items would be part of the staging costs since you had to remove your old stuff to bring in the staging items.  This would be considered an advertising or selling expense. 

[jgeorges45]

Ah, divided opinions.

I wouldn't count the cost of moving furniture into storage or the cost of moving it out once we bought another house. We are not eligible for a tax benefit from moving at all. But staging is a different question. Staging would not have been feasible at all if our (old) furniture had remained in the house. Isn't the whole idea of staging to replace what's there with more attractive - and perhaps less - furniture that shows off the house? For that matter, re-carpeting and interior re-painting would have been very difficult without removing at least some furniture.

[Opus 17]

My thinking is that moving the furniture into storage is a necessary part of the staging, but keeping the furniture in storage (because you had no where else to put it and your other house wasn't ready yet) is on you.  Moving the furniture out of storage and into the new house would not be an expense of selling the old house.

However, if your new house was ready, would it be a selling expense to move your old furniture out if you moved it directly to the new house?  That seems wrong, even if moving the furniture helped you clean and stage.  Why would storage be an ordinary and necessary part of advertising?  Whether you store the furniture, give it away, or sell it and buy new, is a personal decision, and not really an advertising expense.

The more I think about it, it seems to me that nothing about moving or storing your personal belongings is an advertising expense.

(Sometimes the answer is in black and white and 10 experts will give the same answer.  This isn't one of those cases, I guess.  I seem to recall a tax court case that discussed staging, and found that staging was an acceptable selling expense to apply to the cost basis calculation provided that no permanent changes were made to the home.  Any permanent changes would be repairs or improvements.  Improvements like new carpet also add to the cost basis, but repairs are not allowable.  Everyone has the obligation to keep their property in good condition, and repairs made at the time of sale are no more allowable as basis adjustments than repairs made in the middle of your occupancy.  However, I don't know of any tax court case that discusses whether the necessity to move old furniture out can be considered a selling expense rather than ordinary non-deductible moving expenses.)

[jgeorges45]

It's interesting that there seems to be no tax court case on the issue of cost of furniture storage, as distinguished from moving expenses. Surely it must be a common expense among those selling houses. I saw a number of houses last year that were staged for sale, as well as many that were not. In the houses that were pretty clearly staged, the furniture didn't look as though it had been in prior use for a period of time. In other words, the furniture belonging to the current owners had been temporarily replaced. I don't recall seeing in any of these cases a garage or other building on the property that was crammed with furniture;  the owners' furniture had evidently been removed offsite. 

Storage is not in itself advertising. Staging is. But storage, and the associated costs of storage, would be a prerequisite for this form of advertising. So might other costs supporting staging be in some cases. If a homeowner were offered the short-term loan of rooms of furniture at no charge and on the condition that the homeowner rent a truck to get the furniture back and forth, wouldn't the homeowner be entitled to use the truck rental charge as a staging expense? 

[Vanessa A]

Realtor.com is not a tax advice site by any means, however, they specifically list certain costs associated with staging a home.  " One of those costs is storing items so you can declutter and depersonalize a home so buyers can more easily envision themselves living in the home"

Advertising costs are part of selling a home.  Staging is part of advertising.  In order to bring furniture into the house, you would have to remove other furniture or you would be defeating the purpose. 

Reasonably, you are correct, if someone was offered free staging if they got the furniture to the house, the rental of the truck would be part of the cost of staging.  

If you choose to claim the storage fees, simply keep any type of documentation that you moved your stuff into storage for the sole purpose of staging the home. 

 Note, as you and Opus both mentioned, if you moved your items into storage for any reason other than staging, or if you continued to store the items after the house sold, or if you took the home off the market, these fees would not be able to be considered advertising expenses.

[Opus 17]

@jgeorges45 

If there is a distinction to be made, it is between property that you own and property that you do not own, but that you are using for staging.  When you are moving property that you own back-and-forth, the risk is that the IRS would  interpret that as you trying to get a tax break for your personal moving expenses. I don’t have any concerns with you hiring someone else to move their property into your home temporarily.  My concern is with you paying moving and storage expenses for your own property and trying to use that to reduce your capital gains.

[Opus 17]

Just because I don’t know of a tax court case off the top of my head, that deals with whether or not the costs of moving your own personal property are includable as a selling expense, doesn’t mean that such a case doesn’t exist.  I would have to get paid a lot more than $0 per hour to do any extensive research.

[jgeorges45]

As I said earlier, we've never considered using moving expenses for tax purposes. These have always been off the table. Actually the relatively new IRS tax rules severely limit the use of moving expenses to reduce taxes anyway. I'm not a member of the armed forces with orders for a change of assignment location, so I wouldn't qualify under the new rules - or, for that matter, under the old rules either. 

But, yes, I'm certainly interested in using storage charges associated at least with staging to reduce capital gains. In our case that would be 4-6 weeks of storage charges. I don't see that as trying to get away with something unless the IRS or a tax court has already ruled against it. 

[jgeorges45]

The Realtor.com listing of storage costs makes sense to me. We have adequate documentation for the period of staging.

[tagteam]

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@Vanessa A wrote:

Advertising costs are part of selling a home.  Staging is part of advertising.  In order to bring furniture into the house, you would have to remove other furniture or you would be defeating the purpose. 

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The above-quoted statement appears to be eminently reasonable and logical, regardless, and it is a position that would most likely be difficult to dispute (i.e., how else would a house on the market be staged if the current owner's contents are still on the premises?). 

I also believe, as do others apparently, that if the contents were moved for personal reasons, for example, to a new location being used as a residence, then the moving costs could not be considered part of the staging process.

[jgeorges45]

I agree with you on both counts. Storage costs during a period when a house is being staged should be considered part of the cost of selling a house. And if furniture is moved for other reasons, the cost should not be counted as part of the cost of staging. 

[Opus 17]

My last comment will be this.

Staging is allowable as long as it makes no changes to the home (the home is as-was after the open house and removal of the staging.)

Therefore, if you paid to remove your belongings before the open house and return them to the house after the open house, that would be staging.  However, if you remove the belongings to a storage facility, and they are then moved from the storage facility to your new home, that is not staging, because the home is not as-was.  

In my view, you are improperly converting a non-allowable cost for moving your belongings into an allowable cost. 

[jgeorges45]

Is it likely that most sellers who remove their furniture for a staging return their furniture to the house after an open house or two? Our realtor arranged for staging that would last until prospective buyers submitted a successful bid. In our case, that was a matter of weeks. Following your view, homeowners who wanted staging probably would realize a gain in sale price, but that would be offset by having to pay movers to do twice as much loading and unloading of furniture. Our experience was that loading and unloading each took four people most of a day.

And for the record, our furniture was stored at a facility that was in the opposite direction from the location of the house that we eventually bought. The move from that storage location to our new home cost somewhat more than the move directly from our existing residence would have cost.