My wife and I are purchasing our first house in a week or so. We're planning on doing some immediate remodel work.

After we live here for a few years we've talked about renting it out, maybe, maybe not.

I've heard that if we rent it, then sell it, we'll be taxed on the capital gain?

What of my remodeling can be added to the basis?

• Tangibles like floors, paint, appliances, counters, etc?
• Intangibles like labor? What about my time?

I'd like to keep a good record to preserve my options.

Answer to your question towards the end of the article in the 'Adjusted Basis' section:

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

Presley said:

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I've heard that if we rent it, then sell it, we'll be taxed on the capital gain?

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I think if you live in the house for 2 of the 5 years preceding the sale, then it is handled as a typical owner occupied sale.

I'm not an accountant, lawyer, or expert so please verify what I have said.

Thanks, that makes sense. Googled around and found the IRS article to be easier to read than expected:

https://www.irs.gov/publications/p523/ar02.html#en_US_2015_publink100010750

I'm not a tax accountant but I am an accountant.

Additions made while renting should just be expenses if you can. Deduction on ordinary income are more beneficial than cap gains rates, unless you're in a lower bracket.

i didn't necessarily mean the addition of a room but additions in general. Hell, either way, try to expense as much as possible so that you essentially have 0 income from the house.

Timing of the additions is key. You can't write-off remodel if it's your primary residence; so add to your basis that will then depreciate and be used to reduce net earnings once it's rented out.

Once it's generating income, try and expense as much as you can. You can manipulate this if you're already expecting 0 net income after depreciation.

Again, I'm not a tax accountant but that seems to be the general route I would take. Tax basis in the home should be what you paid + capitalized improvements.