Did you know you can deduct home improvement expenses as long as they are made within 90 days of closing escrow on your home? You’ve heard the term “cost basis”, but what is it and what does it mean for you? To calculate how much your home has increased in value, you must identify its cost basis - meaning anything and everything that you spent on your home. The IRS defines a capital improvement as a home improvement that adds market value to the home, prolongs its useful life, or adapts it to new uses. Minor repairs and maintenance jobs like changing door locks, repairing a leak, or fixing a broken window do not qualify as capital improvements. Capital improvements and things you can include in your cost basis include:

• The price you paid for the property, including settlement costs, such as: title fees, legal fees, recording fees, survey fees, and any transfer taxes or fees you paid in connection with the purchase. 
• Additions: An added extra bedroom or bathroom, a deck on the back of the home, a new garage, an added porch or patio, anything that adds value to your home. 
• Landscape improvements: Value-added landscaping projects, driveway or walkway construction, a new fence or retaining wall, adding a swimming pool, etc. can qualify as property improvements. 
• Exterior improvements: New windows, a new roof, and new siding are examples. Any and all renovation costs including any and all costs related to that renovation work. 
• Insulation: This includes insulation in the attic, inside walls, under floors, or around pipes and ductwork. 
• Systems: Installing a new heating or air conditioning system, new ductwork, adding a central vacuuming system, wiring improvements, installing a security system, solar, geothermal, generators, batteries, and putting in lawn irrigation. 
• Plumbing: Installing a sewer system, water heater, or soft water system. 
• Interior improvements: New appliances, kitchen renovations, new flooring/carpeting, the installation of a fireplace, etc. 

Cost basis does not include hazard insurance premiums, moving expenses, or any mortgage-related charges (mortgage insurance, credit report fees, and appraisal costs). General repairs that are essential to keep something working do not qualify. Yard maintenance, HOA fees, and real estate taxes don't count either. 

It’s important to always check with your accountant when in doubt. The easiest way to solve the equation – keep tabs on these costs throughout the lifetime of your home.

Dana & Team