# Cost Basis for house. What can I include? **URL:** \ **Category:** Factual Questions\ **Created:** [November 20, 2014, 6:35pm UTC](https://boards.straightdope.com/t/cost-basis-for-house-what-can-i-include/705182 "2014-11-20T18:35:38Z")\ **Posts on this page:** 6\ **Page:** 1
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [November 20, 2014, 6:35pm UTC](https://boards.straightdope.com/t/cost-basis-for-house-what-can-i-include/705182/1 "2014-11-20T18:35:38Z")
Just bought a new house and there are 3 major projects we are going to do over the next year. 1. Rebuild 5 fences, 3 of which include gates. 2. Removing a concrete slab and building a wood deck with a hot tub. 3. Relandscaping most of the front and back yard. All told, this will cost us a couple of thousand over the next year so what can I include in the cost basis of the house? Specifically … The hot tub? Materials such as wood and concrete? Flowers, plants and seeds? Fair market value for my labor? ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 20, 2014, 6:49pm UTC](https://boards.straightdope.com/t/cost-basis-for-house-what-can-i-include/705182/2 "2014-11-20T18:49:56Z")
Are you talking about the basis for tax purposes? If so, start [here](http://www.irs.gov/publications/p551/ar02.html#en_US_2010_publink1000256908). ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [November 20, 2014, 7:35pm UTC](https://boards.straightdope.com/t/cost-basis-for-house-what-can-i-include/705182/3 "2014-11-20T19:35:36Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Are you talking about the basis for tax purposes? If so, start [here](http://www.irs.gov/publications/p551/ar02.html#en_US_2010_publink1000256908). Which does nothing to help me since it talks about the cost-basis with buying a house - nothing that deals with cost basis after buying or tax considerations with improvements. ---
**Author:** ![dracoi](https://avatars.discourse-cdn.com/v4/letter/d/90db22/32.png) [@dracoi](https://boards.straightdope.com/u/dracoi)\ **Post date:** [November 20, 2014, 7:38pm UTC](https://boards.straightdope.com/t/cost-basis-for-house-what-can-i-include/705182/4 "2014-11-20T19:38:23Z")
You would never include FMV of your labor. You’re only looking at costs. FMV might come up if you’re bartering for items or services, but if it’s just you working, there’s no cost. Just about anything you do prior to moving in would be part of cost basis. That’s greatly simplified, of course, but the tax law does define cost basis to include the cost of “putting into service” the asset. Once you’ve moved in, you have to separate things that are repairs (not cost basis) and improvements (part of cots basis). The IRS just issued 250 pages of “clarifications” on this issue and even that has most pros scratching their heads on some items. It’s not always intuitive. For large building projects, people will literally hire a team of engineers and accountants to get together and parse out each component. But if I was going to give a simplified take on it, ask yourself: 1) Is this becoming a permanent part of the home’s structure/function? 2) If I sell the house 10 years from now, will this increase the sale value? If the answers to either are yes, then it’s probably safe to include it in cost basis, though this is certainly not a precise legal definition. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 20, 2014, 7:54pm UTC](https://boards.straightdope.com/t/cost-basis-for-house-what-can-i-include/705182/5 "2014-11-20T19:54:37Z")
> [@Saint\_Cad](#): > > Which does nothing to help me since it talks about the cost-basis with buying a house - nothing that deals with cost basis after buying or tax considerations with improvements. See the part about “constructing assets”. ---
**Author:** ![Quercus](https://avatars.discourse-cdn.com/v4/letter/q/7ab992/32.png) [@Quercus](https://boards.straightdope.com/u/Quercus)\ **Post date:** [November 20, 2014, 9:11pm UTC](https://boards.straightdope.com/t/cost-basis-for-house-what-can-i-include/705182/6 "2014-11-20T21:11:34Z")
Just noting that it may well be moot: If this is your residence, you don’t pay any tax on the first 250,000 (or half million if married) of appreciation when you sell the home, anyway. > **[Sale of Residence - Real Estate Tax Tips | Internal Revenue Service](https://www.irs.gov/businesses/small-businesses-self-employed/sale-of-residence-real-estate-tax-tips)** > > You may qualify to exclude from your income all or part of any gain from the sale of your main home. Your main home is the one in which you live most of the time. > > Ownership and Use Tests > > To claim the exclusion, you must meet the ownership and use...