Your original basis is the cost of the land, materials, and labor you paid for. Plus other required legal costs such as for permits, inspections, and surveys.
In general, a repair is something that you would do to maintain the home at a basic level and the cost of the repairs is not added to the basis of the home.
A capital improvement is something that actually adds to the value of the home or increases its usefulness. Some examples of capital improvements are:
- Remodels and room additions (including decks and porches)
- New or upgraded landscaping, irrigation, sprinkler system
- Hardscape such as pavement, block or retaining wall, patio
- Fencing
- Swimming pool, spa
- Storm windows, doors
- New roof
- Central vacuum or security system
- Upgraded wiring, plumbing, ductwork
- Central heating, AC, humidifier
- New furnace, water heater
- Filtration, soft-water, or septic system
- Built-in appliances
- New flooring or wall-to-wall carpeting
- Upgraded insulation
- Satellite dish
Certain expenses paid in connection with the purchase or refinancing of a home, regardless of when paid, are capital expenses that must be added to the basis of the residence.
These include:
- attorney's fees
- abstract fees
- surveys
- title insurance
- recording or mortgage fees.
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