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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
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Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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Can I write off personal labor for home improvements and take

Resolved Question:

Can I write off personal labor for home improvements and take tax deductions after the sale of my house?
Submitted: 5 years ago.
Category: Tax
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

Thank you for your question.

 

Unfortunately you are unable to take personal labor, or value for your time working on your home.

 

However, if you can get your contractor to "hire you" and you work as a member of the crew, your wages are rolled into the cost of your home,which means you would capture your labor as part of the cost basis of the home, and you get paid to boot.

Customer: replied 5 years ago.
So if I built my home with all my labor and received deals on materials. Say I put in 200k of labor to build my house and payed 100K in materials and sold my house for 300k and despite capital gains I would then pay taxes on the 300k minus the 100k for deductions of materials but if I stayed in the house for two years via capitol gains I would pay no taxes.
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

That is correct.

 

the cost basis of your home where you build it yourself is the cost of materials, and other expenses related to building. for example, building permit fees and inspections; insurance, etc. Then when you live in it; from that point forward it becomes your primary residence. You figure capital gains as:

 

Capital gains = sale price - cost basis - cost of selling.

 

If you live in it for two years, you can take the maximum capital gains exclusion of 250,000 if you file single or married seperate or head of household; or 500,000 if filing jointly.

 

If the capital gains did not exceed the exclusion for your filing status you would not pay any capital gains tax.

Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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