Home improvements and your taxes

I'm a bit late blogging today because I spent the last few hours adding to our house plant collection.
The hubby handles the outdoors. I'm in charge, for the most part, of the interior flora. We have 35½ plants (the half is a hydrangea I'm trying to resuscitate); four are the hubby's orchids, the others are my leafy (and sometime flowery) babies.
Most are Pothos ivy, with a couple of cacti, some mother-in-law tongues, two African violets and several others that I don't know the formal names of, but we've had them for ages.
Lately, the most prolific of our collection are the airplane (or spider to some folks) plants.
That's what occupied me this morning. A couple of weeks ago I stuck some shooters into water and they were ready for transplanting. I had to run to Home Depot, pick up a pot, decamp to my potting bench out back and voila! Below is our newest flora family member.
It's our fourth airplane plant, and all came from one plant we got in Maryland, carried with us to Florida and finally carted here to Austin. Yes, despite the advice of everyone, we've moved our plants, across towns and halfway across the country.
Our original airplane plant was a tiny, three-inch diameter thing that struggled occasionally. But thanks to re-potting, repositioning for better sun exposure and lots of prayers and pampering, it survived.
And once it got here to Texas, it took off, putting out shoots that we clipped and rooted and potted … again and again and again.
Adding to a home's basis: While the house plants are great (except for their growing watering needs!), it's the exterior landscaping that's really valuable.
Disappearing_stream_2Some of you might have noticed the feature at the bottom of the ol' blog's left column entitled "Our backyard renovations." As noted there, this spring we finally got around to revamping our out-of-control backyard, and I posted some snapshots of the major improvements. 
We're delighted with the new look -- an extended patio, a butterfly garden, a terraced planter at the back of our previously very steep backyard and, the piece de resistance, our disappearing stream.
In case you haven't yet clicked on the backyard feature, or want to do so after you finish reading this post (thank you!), above is the stream, which the songbirds like as much as we do.
Yard_equipment_2But to get to our new backyard haven, we had to deal with two months of crews on our property, a lot of noise, that piece of heavy equipment pictured there to the right and the literal laying of groundwork that was sometimes a bit disconcerting.
We definitely learned is that it's not necessarily a good idea to watch essentially every move your renovator, interior or exterior, makes. The finished product is great, but seeing it happen was the proverbial sausage factory, i.e., not a pretty sight at all.
The finished product also was very expensive. The hubby kept muttering, "I can't believe we're buying dump trucks of dirt and rock." But we did; four truckloads, in fact. We had, however, saved up for all that dirt and rocks, as well as the plants, patio stone and grass.
And while the project emptied our savings account a bit, it has added to our home's value. When we eventually sell, which I guarantee isn't going to be any time soon now that we've got the backyard done, it also should help make sure we don't have a tax bill.
Banking on tax-saving basis: While home sale profits of $250,000 for single taxpayers and $500,000 for married couples filing jointly are exempt from taxes, sometimes sellers come close to those numbers. That's not a problem in a lot of areas in today's market, but if you've owned a home for a long time, you still could push the no-tax profit limit.
And the real estate market will recover, so you always need to plan on possible tax implications. That's where your home's value, or basis, comes into play. The greater your home's basis, the lower your profit and therefore your potential taxes.
Here's how it works. When you sell your house, your capital gains will be based on the difference between the sales price (less any selling expenses) minus the adjusted basis. Home improvements, including landscaping, can increase your basis as long as the changes "add to the value of your home, prolong its useful life, or adapt it to new uses."
Our backyard changes have definitely adapted the space to new and more frequent uses!
Page 9 of IRS Publication 523, Selling Your Home, lists more ways you can increase your home's basis. This story also has some ideas.
Just be sure to keep the receipts for all the work you get done to prove your home's adjusted basis.
One nontax suggestion: Make your home improvements while you're still in the house to enjoy them.
A lot of folks wait until they get ready to put their home on the market to take care of upgrades in order to boost the sales price.
It's a win-win if you make your house more appealing not only to potential buyers, but also to your family while you're still living there!
Wild roots: One more home agriculture tale before I go. Below are the roots of an ivy clipping that I had stuck in a watering can shaped container. But I never expected the roots to fill it up so perfectly!
It was a challenge stuffing those wildly-shaped roots into a regular pot, but I managed. Below is how the plant looks today. I'm presuming its roots now have a more normal look, too!

No comments:

Post a Comment