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Tax.appeal.168
Tax.appeal.168, Tax Accountant
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1. Will the IRS allow labor hours when the work is completed

Customer Question

1. Will the IRS allow labor hours when the work is completed by the homeowner--we built a new cabin in 1980, paid to have the shell put up and finished part of it ourselves. 2. Will a large capital
gain affect how much we receive in Social Security payments the following year and thereafter. Thank you, ***** ********@******.*** XXXXXXXXXXXX
Submitted: 2 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 2 years ago.

Q1: Will the IRS allow labor hours when the work is completed by the homeowner--we built a new cabin in 1980, paid to have the shell put up and finished part of it ourselves.

A1: In brief, the answer is no, labor performed by the homeowner is not included in the basis. SEE BELOW:

If you build your home yourself, your starting basis is the cost of construction. The cost includes the cost of materials, equipment, and labor. However, you may not add the cost of your own labor to the property’s basis. Add the interest you pay on construction loans during the construction period, but deduct interest you pay before and after construction as an operating expense.

REFERENCE SOURCE:

http://www.nolo.com/legal-encyclopedia/determining-your-homes-tax-basis.html

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Q2: Will a large capital gain affect how much we receive in Social Security payments the following year and thereafter.

A2: Capital gain income is not counted in determining your social security benefit amount. However, yup to 85% of your social security can be taxed if your income exceeds a certain amount. SEE BELOW:

If you and your spouse file a joint return with a combined income below $32,000, your benefits are out of reach. For income between $32,000 and $44,000, up to 50 percent of benefits may be taxable, and up to 85 percent if combined income is more than $44,000. For more information, go to Social Security's website.

Let me know if I can be of further assistance to you regarding this matter.