I understand that home improvement expenses, such as new flooring, landscaping, appliances, etc. can be used to offset any capital gain you realize when you sell your home. I also know that the expense of home repairs cannot be used in this way.
In June of 2023, my town started a new law: you must have your sewer lateral inspected and replaced if necessary and be issued a certificate of compliance before your home sale can go through (this is because of flooding problems last winter, and the next town downstream of us sued our city).
My question: Do you think the (large) expense of this inspection and replacement can be used to offset capital gains the same as a home improvement expense? I ask because we just had this done. Our old sewer lateral line was operable, just old and in danger of failing, so we went ahead and replaced it so that it would facilitate the sale of our home.
In view of the fact that our city required this, and that this wasn’t really a repair but a replacement, I lean towards counting this as a home improvement and using the expense to offset our home sale’s capital gain.
Interesting question. Did the inspection & repair involve bringing the sewer line up to a more stringent building code than was in place when the house was built?
In Massachusetts, houses with a septic system have to pass a Title 5 inspection before they can be sold. This often involved significant expense & work even for systems that were currently functional, because the codes for septic systems had been tightened up significantly for many of the houses under consideration. This did count as a home improvement expense (at least our tax guy said so) because the system was being upgraded to a higher code/functionality. But if the repair to your sewer line was just fixing it back to the same condition it was in when it was built, that probably wouldn’t apply?
This was my swag too, but I am not a tax guy, You should ask your CPA if you are really concerned, and if it’s a grey area do you really want to go toe-to-toe with the IRS over a few hundred dollars?
This procedure cost $15,000. My realtor just replied to an email query I sent him on this subject, and corroborates muldoonthief’s post. If the plumbers upgraded us when they replaced the pipe, that can constitute an “improvement”. They did indeed upgrade us, to a larger bore pipe, and installed a second clean-out while they were at it.
That’s clearly an improvement and not a repair. Make sure to have everything in writing from the plumbers so it’s clear what they did to improve things and you should be good to go.