Posted in Finance, Accounting and Economics Terms, Total Reads: 297
Definition: Fixing Up Expenses
Fixing up expenses are the expenses that one incurs in order to maximize or improve the saleable value of their house. Fixing up expenses does not include major improvements in the house such as addition of a new kitchen or a room or a new swimming pool or a new roof. These expenses are considered as capital expenditure by IRS. However, it does include small minor improvements such as small electrical fixtures or repairing of doors or windows of the house or repairing a leaky roof etc. these fixing up expenses may prove useful to the house owner who needs to sell the house.
A repair is basically something which helps to keep or maintain the house in good working condition but it does not add anything materially to the property. Since, the income generated through the sale of house is taxable by income tax department. If one does not try to reduce, defer or eliminate such taxes, then it is possible that such taxes may extend upto almost 33% or one-third of the total sale amount. One way to reduce such king of tax is fixing up expenses as defined by Internal Revenue Service (IRS) of United States. For married couples, IRS allows deductions upto $5, 00,000 while singles can claim deductions upto $2, 50,000.
However, in order for small expenses to be considered as fixing up expenses for tax deduction should satisfy following criteria:
• It should only be for repair work
• Within 30 days of the signing up of sales contract these fixing up expenses should be paid
• The repair work done for fixing up expenses should be performed within 90 days or three months prior to the signing of sales contract
• All receipts should be in place with the home owner