What can I use to reduce the cost basis on the sale of a second home?

[mccshirley]

The home was not a rental and was owned for over 30 years. The land was purchased, then we built the home on it.  Over the 30  years many improvement were made to the home.  Is the Purchase price the price of the land or the finished home?  What additions or improvements can be used to reduce the cost basis?

[Opus 17]

The original cost basis is the cost of the land, plus the cost of building the home.  You can include materials and labor you paid for, but you can't include the value of your own labor.  You can include the cost of required permits and inspections.  You can include the cost of landscaping and installing utilities.  Basically, you can include anything that increases the value of the real estate, which means land plus anything permanently installed on or under the land.  

Then, you can include the value of improvements over the years as long as the improvements are still part of the real property.  For example, if you replaced the roof in 2000 and again in 2015, you could only include the cost of the second roof that is still part of the property.  Improvements are permanent changes that increase the value of the property or extend the useful life of the property or one of it's sub-systems.  Improvements are also sometimes called betterments, since they make the property better.  There are lots of small changes that can still be counted as improvements for the basis, because they are installed to the property, like light fixtures, replacement bathroom faucet, and so on.  Improvements don't have to be large, they just have to be permanently attached to the home and increase the home's value. 

You can't take adjustments for repairs and maintenance.  Repairs either maintain the property value or restore the property to as-was condition and don't increase the value of the property.  Repairs are just something everyone is expected to do to maintain the value of their property.  

[JohnB5677]

I think you want to increase the cost basis to reduce your taxes. 

Common improvements that might increase your cost basis include (but are not limited to) 

• bathroom or kitchen upgrades
• home additions
• new roofing
• the addition of a fence or deck
• and various landscaping enhancements

You are also allowed to deduct from the sales price almost any type of selling expense, provided that they don’t physically affect the property. Such expenses may include:

• advertising
• appraisal fees
• attorney fees
• closing fees
• document preparation fees
• escrow fees
• mortgage satisfaction fees
• notary fees
• points paid by the seller to obtain financing for the buyer
• real estate broker's commission
• recording fees (if paid by the seller)
• costs of removing title clouds
• settlement fees
• title search fees, and
• transfer or stamp taxes charged by the city, county, or state governments