Lake Condo improvements that can lower your capital gains

If you sell your Lake of the Ozarks condominium and have to pay the capital gains bill (try to avoid this using an IRC 1031 Exchange) there are some improvements that you can enjoy while owning and reap the benefits of later at sale time.  I’ve had clients ask me that if they refinance their unit prior to selling so they don’t have any proceeds at closing, can they avoid capital gains?  The answer is no, because the IRS doesn’t tax your proceeds, they tax you according to your "Basis" at sale time.  Basis is what you paid for the condo, any settlement, closing costs and debt on the unit.  The idea is to increase your basis when possible, and certain improvements can do this. 

In general terms, repairs do not increase your basis, but you will want to keep records of them so you can expense them in that tax year.  For example, a new air conditioner will not increase your basis, but adding a water softener will.  Painting the master bathroom will not add to your basis, but installing a jetted tub will or tile flooring will.  Surround sound wiring, satellite TV, a programmable thermostat, these would all add to your basis. 

The IRS provides a helpful chart on Pages and 8 and 9 of Publication 523, Selling Your Home of things that can increase your basis.  Think about these things when remodeling or upgrading your Lake condo. 

If you have any questions about RE/MAX Lake of the Ozarks or buying or selling Lake of the Ozarks real estate, you can always contact John Garrett at 573-302-2320 or e-mail us for a fast response. 

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