As I understand it, if capital gain is less than $250K for single filer, $500K for joint filers, then there is no tax due. I believe it has to be your primary residence for two of the last five years before the sale.

I am a CPA but not a tax guy, Snidely or one of the tax guys might jump in. But this is a pretty easy question, so I will answer.

In general you can deduct $250,000 ($500,000 for married couple) of capital gains once every two years for a home that was a primary residence for 2 of the previous 5 years. So no, as long as it was your primary residence, you don't have to do anything.

Now to give further insight, your cost basis is amount paid plus closing expenses plus capital improvements. In general capital improvements are permanently affixed items that increase either the value or extend the useful life of the home. So, while I might want further investigation here are my immediate responses.

Installed stamped concrete (stone design) patio under deck. - what was there before? If a new feature that added value then yes it is a capital improvement.

Replaced living room & dining room carpet with Bruce hardwood. - yes

Replaced heat pump (indoor air handler and outdoor condenser) - defintely yes

Replaced floor/rails of deck. - probably no (sounds like maintenance)

New front door - probably yes but might need more details.

Replaced all windows (except sliding glass door). - definitely yes

Replaced fridge, dishwasher, range, microwave/convection/hood - built in appliances may be capital improvements, free standing are not

Renovated powder room and two bath rooms (porcelain tile, vanities, toilet, tub, shower pan, light fixtures, paint) - yes

Renovated kitchen-- new cabinets, porcelain tile floors, granite counters, tumbled marble backsplash, lights fixtures, paint. - yes

I can't break out the cost of painting from the reno projects, so I'm not sure how to handle that. - if the painting was necessary as part of the renovation (I.e. built a new wall or damaged wall to access plumbing) then it too is a part of a capital improvement, if the paint was in addition to the improvement and not necessitated by it, then it is not.

Hope this helps.

Appliances, heat pumps, painting, etc. all sound like maintenance issues. - Certain things such as replacing a heat pump or replacing a roof may seem like maintenance but are actually capital improvements. This is because those items extend the useful life of the home or it's attached fixtures. Even appliances can be capital improvements if they are permanently affixed (built-in). Repairing a roof, furnace and appliances are not capital improvements. Generally painting is not but you can read above and see it can be.

you can include all those in the cost basis...its all part of the sale

you can include all those in the cost basis...its all part of the sale - I think you are misunderstanding the question. The OP is asking about the taxable basis in the house, which is based on amounts paid, not sales price received. I promise that some of those items are normally not included.

I hope you saved every receipt for all the aforementioned items. They want proof. I was in shock when I faced the tax man after I sold my home after the divorce. OMG! I'm very thankful I had saved every check stub and receipt. Good luck to you!

Thanks for the feedback, everyone. I forget who asked, but all this was done over many years. The patio was first, in 1998; the hardwood floors in 2001;bathrooms 2008, windows 2010; the kitchen a year and half ago.

Oh, and we replaced our fence last summer, but if the deck is maintenance, I think the fence is, too.

Regarding the patio, bry911, what was there before was just dirt. I couldn't grow grass under the deck (the deck is one floor above the ground, the patio is outside the basement level under the deck).

Lucy, yes primary residence.

I am guessing we could sell for the average closed price in the last several months in our development without a problem. Since we are in a townhouse community the homes are pretty similar. Some neighbors have made similar improvements over the years and others not.. Some recent sales still have late-1980s kitchens (based on realtor.com photos). So that average seems a good guess. With that average minus 6% for a realtor, minus my original purchase price (not even counting my original closing costs), the profit would be $202K. So maybe we won't have to actually do the other cost basis adjustments.

i didn't misunderstand the question at all. what other basis would someone be concerned about?

The IRS actually publishes a list of what counts towards the cost basis: http://www.irs.gov/pub/irs-pdf/p523.pdf. The list does include a new roof, furnace, fence, and other items that I would generally think of as maintenance. Painting and appliances that are not built-in are not included, nor is repair to existing features. (The example they use is that replacing a broken windowpane is not a capital improvement, but replacing the entire window is--same would likely apply to your deck repairs.) We save the receipts for everything just in case (not that this is ever likely to come into play for our house!)

Oh, and Suzi, the receipt issue occurred to me. I'm not the most organized person. If I can't find receipts for stuff, I guess I just can't count it. Fortunately, recent stuff (windows, bathrooms, kitchen) involved exchanging contracts and receipts by email and I have them saved electronically as well as in a file. But as I say above, the profit will likely not be enough to require digging them all out.

@ mary_md7

If your gain is only $202k, you are fine. You will not have to do anything until you are over the $250k mark, which gives you plenty of wiggle room. I would not even bother looking into it any further, feel free to double check with your CPA or tax professional, this is the type of question I wouldn't even bother billing for.

@ randy41_1

i didn't misunderstand the question at all. what other basis would someone be concerned about? - I was just trying to be nice instead of saying don't give advice when you have no clue. The IRS has stated that free standing appliances are not included in cost basis (as they are not permanently affixed), replacing boards on a deck is clearly a repair that would be excluded, and painting is even specifically named in publication 523 as excluded. None of those things (all three of which are mentioned above) would be included in the cost basis. While I can name some interesting ways to get some of those disallowed items into your cost basis the one thing that you will never ever consider in the cost basis is the amount you sell the property for.

mary, if you can't find receipts, and saved your check registers, look through that. Sometimes a vendor will have receipts also, and you can go back to them and see if they have the records.