We sold a second home in 2021. Our son had lived in the house for the past five years while he went to school. During this time we did extensive renovation (over $100k invested). When he moved out, he took virtually everything with him leaving us with a ‘bare’ house. We purchased furniture and decorating (some new, some second hand) to stage the home. This was bought just to stage the house. We believe we can apply staging expenses to the Cost Basis if we hire a home stager, but can we apply staging expenses for furniture, decorating, a fully functional kitchen, linens, etc that we purchased in order to facilitate the sale of the house? Does it matter if the buyers had purchased all the house contents including furniture, decorating, comforters, pillows, linens, towels, TVs, plates and utensils, area rugs - basically everything in the ‘fully move-in ready home’ except food and clothing.
If you did extensive remodeling (like the kitchen) definitely add that to the Cost Basis of the home, as it's a permanent improvement.
Things like furniture, decorating, linens, etc. you could include as 'Sales Expenses.' Since the buyer purchased all these items with the home, theoretically you could add them to the Cost Basis; however, normally only 'improvements' are added.
In the end, both Cost Basis and Sales Expenses are subtracted from the Sales Price to determine Gain/Loss, so the bottom line will be the same wherever you add them.
Just don't deduct 'normal maintenance/repairs' as that is expected to be done anyway and is not deductible for a personal property (that is not a rental).
Click this link for more info on Additions to Cost Basis on Home Sale.
If you did extensive remodeling (like the kitchen) definitely add that to the Cost Basis of the home, as it's a permanent improvement.
Things like furniture, decorating, linens, etc. you could include as 'Sales Expenses.' Since the buyer purchased all these items with the home, theoretically you could add them to the Cost Basis; however, normally only 'improvements' are added.
In the end, both Cost Basis and Sales Expenses are subtracted from the Sales Price to determine Gain/Loss, so the bottom line will be the same wherever you add them.
Just don't deduct 'normal maintenance/repairs' as that is expected to be done anyway and is not deductible for a personal property (that is not a rental).
Click this link for more info on Additions to Cost Basis on Home Sale.