Assuming it is a valid improvement, can sales tax, shipping, and delivery charges be included in the
costs of materials? When building a home, in particular, these can really add up between delivery costs of building materials to the sales taxes on each component (lumber, insulation, light fixtures, toilets, etc.).
Does this apply regardless of whether the homeowner or a contractor purchased the materials? Contractors include sales tax & delivery charges in their total bill. As a side note, I believe canceled checks are an acceptable documentation of an improvement. The check amount would cover any sales tax, shipping, and delivery charges included in the total bill.
Yes, you can increase basis by purchase price, shipping and sales tax. Note: If you itemize you may be able to deduct the sales tax you pay (usually if you live in a state that does not have sales tax)- if you do, you should NOT add to basis. @kevinr12240
Yes, all of the costs included to receive the materials needed for a valid improvement. Shipping is very costly and can definitely be added to the cost of an item.
As long as the item is used to improve the house the purchases can be made by the homeowner or the contractor. The total purchase price of the improvements is added to the basis.
Canceled checks are a great way to document the cost along with credit card receipts and invoices from the contractor.
Please see this TurboTax tax tip for more information.
Thank you for your prompt and helpful response.
To clarify, the total cost of a valid improvement is the purchase price plus BOTH the sales tax and any shipping/delivery charges. Correct?
Yes, you can increase basis by purchase price, shipping and sales tax. Note: If you itemize you may be able to deduct the sales tax you pay (usually if you live in a state that does not have sales tax)- if you do, you should NOT add to basis. @kevinr12240