Can I reduce my capital gains tax obligation with costs of carpet cleaning pre-home-sale?

Carpet cleaning may help you sell your home, but the IRS won't give you any tax benefits for it.

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Question

I'm getting my house ready to sell, and I admit, my carpets are beat up and filthy. I'd rip them out if the floor below wasn't also in bad shape and covered with carpeting glue. I can't afford to replace them, so my real estate agent says having them professionally cleaned is my next best bet. Even that's going to cost me a bundle.

What's more, because I bought this house over 25 years ago, it has gone up so far in value that my accountant says I'm going to owe capital gains tax. Can I at least reduce my tax bill by the amount I spend for the carpet cleaning?

Answer

Prospective homebuyers don't want to trudge around on filthy carpets. So hiring a professional carpet cleaner to make your home's carpets look presentable before you offer it for sale is a great idea.

However, the expense provides no tax benefit for you. You may not deduct the cost from the proceeds you receive when you sell your home. Nor may you add the amount of the expense to your home's cost for tax purposes (its "adjusted basis" in tax parlance). The only home sale expenses you can deduct are those that don’t physically affect the property such as real estate broker commissions, and various other fees involved in selling a home such as escrow fees, settlement costs, attorney fees, and so forth.

Have a look at Nolo's article, "Avoiding Capital Gains Tax When Selling Your Home: Read the Fine Print," for other ideas on reducing your tax hit.

by: , J.D.

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