California tax accountant
The paint. The dust. The torn-up room. Home improvement projects may not be high on your list of enjoyable events. But, when you’re ready to sell your house, any money you’ve spent on fixing it up may save you from paying tax on the sale.
The Home-sale Exclusion
You probably know that a married couple is entitled to $500,000 of tax-free gain ($250,000 for singles) on a home sale if they’ve used the house as a principal residence for two out of the five years prior to the sale. Taxable gain is the difference between your basis in the home (essentially, your cost) and the selling price. So, for most people, the exclusion eliminates or severely reduces any tax on a home sale. But not for all.
And that’s where home improvements could come into play. If you’ve kept good records, you can increase your home’s basis by adding in remodeling costs. Generally, any work that adds to your home’s value or extends its life counts toward your basis.
Examples of eligible expenditures include:
- Putting in a patio, deck, or swimming pool
- Finishing a basement or attic
- Adding a room or fireplace
- Vinyl or aluminum siding or similar exterior improvements like masonry work
- Storm windows and doors
- New plumbing or heating system
- Air conditioning
Simple repairs, such as painting or fixing broken gutters and windows, don’t get added to your basis. But, if repairs are scheduled as part of a home improvement project, the entire cost of the renovation can be added to your basis.
Connect with our team today for all the latest and most current tax rules and regulations. Give us a call at 510-222-5800.
For many that are native to Puerto Rico, the island’s economy is forcing them off the island and onto the main land of the United States. Puerto Rico’s economy is in a death spiral and families are losing their homes and businesses, so why do the rich continue to flock there? The answer can be summed up in two words: tax exemptions.
While the middle and lower economic classes are streaming off the island, the super rich are taking advantage of tax exemptions enacted in 2012 to help the economy. Simply put, Puerto Rico are offering tax exemptions to rich Americans, so they will buy existing businesses and open new ones.
These tax exemptions, which fall under the 2012 Export Services Act and the Individual Investors Act, provide non-residence investors a 3 to 4% flat income tax, zero property tax, as well as 0% tax on earnings and profits.
In addition, investors can enjoy a 0% tax on dividends and interest as well as a 0 to 10% tax on long-term capital gains. When compared to tax rates of up to 20% in the United States, it can be quite the incentive for rich investors.
For example, hedge fund owner John Paulson is currently investing $1.5 billion dollars in real estate on the island in the form of luxury resorts and hotels such as the Condado Vanderbilt Hotel and the St Regis Bahia Beach Resort.
While Puerto Rico’s debt crisis continues to worsen, and about 200,000 residents are leaving each year, you can expect the influx of American investment money to continue for the foreseeable future.
If you are looking for ways to lower your tax liability, call 510-222-5800 and ask for Navjeet. We help small business owners and high net worth individuals lower their taxes legally.
Chahal & Associates is a California accounting firm with three offices in the Bay area of Northern California, Emeryville, San Rafael and Pinole. Our firm provides small business accounting services, payroll and a variety of tax services ranging from international tax to IRS Problem Resolution to simple tax preparation. For business owners seeking to establish a business within the United States, we also provide establishing United States Operations, High Net Worth Immigration Planning, Expatriate Taxes, and Resident and Non-Resident Alien Tax Services.