America’s tax code. No one actually knows just how many pages are in it. The best we can do is pull some quotes from members of the Congress who have tried to explain the enormity of the thing.
- “The Internal Revenue Code and regulations add up to one million words and is nearly seven times the length of the Bible.” U.S. Representative John Hostettler (R-IN)
- “The Internal Revenue Code and regulations now come in at one million words and 9000 pages.” U.S. Representative Spencer Bachus (R-AL)
- “The Bible, the guide of our lives, is 1,291 pages and contains 774,746 words. But the Tax Code and its regulations which are referred to by some as, ‘a person’s worst nightmare come true’ is 9,471 pages and over 7 million words.” U.S. Representative Jo Ann Emerson (R-MO)
Fixing Up Your Home and Deducting It
The fine people at the Internal Revenue Service thinks that, based on the monster document, any repairs or renovations to your personal residence is on your dime. Now if you have a home business, that could be another story.
Let’s say you don’t run a company out of your house. You have some renovations done which raises the value of the property. You then flip-it at a higher price, you might be in for some payback when you sell it at for more than you purchased it. You’ve increased its value.
You must have lived in the place for at least three of the five years prior to the sale. The military gets a break. After all they’ve been ordered to vacate the premises for a trip to some exotic, war-torn country.
It’s called, soldier or civilian, a capital gains tax exclusion of $250,000 for singles, $500,000 if you are hitched and file a joint income tax return.
Dig Deeper
When we compare home improvements and renovations versus repairs, here’s what the IRS says. Spending your hard-earned cash to keep the roof from falling-in around you, that’s your responsibility.
To make matters confusing, there’s a black hole between renovations and repair projects. But it still seems to come-out in Uncle Sam’s favor when it comes to everyday repairs.
Renovations appear to be a little different. Since they generally improve your house’s value, like a new deck or hardwood fence from Timbertown Austin, you’ll get payback. Not from the government. It does, however have the potential to amp-up your investment income or when you sell it.
But forget about taking any deductions the first year. The news is that the IRS does not smile on these costs as business expenses or deductible as you pay taxes. The IRS views that the money you shelled-out can be spread over the useful life of the property. Maybe you’ve heard of the two terms called depreciation and amortization. That’s what it means.
Here’s an example: You’ve spend about 25-grand on a couple of capital improvements. Divide the amount you spent by the depreciation period part of your property. Generally residential real estate is thought of in 27.5 life spans. So, you can take a deduction of a little over 900-dollars.
Here’s the formula:
cost/depreciation period = depreciation tax deduction
$25,000/27.5 = $909.91
There is a way. We’d recommend getting some good tax software or hiring a smart tax guru who’s up on any changes to the law. Who knows, by now the tax code could be up to 50-billion pages.
Original Source: http://timbertownaustin.com/home-improvement/home-renovations-and-taxes/
