Hand excavated french drain groundwater removal systems, pay much more than they cost, especially in a tough real estate market like the one we are in right now.
This means that because… hand excavated french drain groundwater removal systems are not just repairs, and did not exist previously at the home, they are capital improvements, from a tax standpoint.
The money homeowners spend on solving home drainage problems prior to putting the home on the market, or during a home transaction, if home sellers elect to save their home transaction by installing hand excavated french drain groundwater removal systems prior to the bank loaning on it for the new buyers, is recaptured at closing of escrow.
The sale price of the home, for example, is $300,000.
The purchase price of the home, plus any capital improvements installed since it was purchased, becomes the homeowners adjusted cost basis in the home.
The sale price, minus the adjusted cost basis equals gain on sale.
The adjusted cost basis, is what the homeowners paid for the home, plus any capital improvements that did not exist before they bought the home.
Keep in mind as well, that single homeowners who have owned a home two years or more, an for whom it is their personal residence, are exempt from federal capital gains taxes up to and including the first $250,000. of their gain on sale of the home, which is the difference between the sale price and the adjusted cost basis.
Make less than $250,000. gain on sale, and a single individual pays no tax. If married, double it, up to $500,000.
Stepping up pays big benefits in many ways for home sellers who install home drainage systems prior to listing the home.
These home sellers just add the home drainage work to the sale price before they list it. It is another level of security for the home sellers, and the prospective home buyers as well, making sure they don’t get off the closing schedule and are prevented from closing on the home.