Thanks for sharing Patricia. I discovered this Tax deduction just recently when I was doing my taxes.

OK, here goes ~ after spending over 45 minutes with IRS, being transfered from 1 Agent Rep to another I have confirmed the following: 

According to IRS Agent # 5907462 - Staging Fees for the Home Owner / Seller, in-and-of-itself, can NOT be deducted (he said to see Publication 523, or 551 pages 2 & 3) UNLESS you file them under miscellaneous selling expenses under a "cost basis" - whatever that means -  in form Schedule A of Publication 529.

For Realtors, yes, these fees can be deducted as a cost of doing business under advertising

(You can all thank me later) :-)

Patricia ~ Thanks for the mention!  I have ordered the publication in question (#523) so that I can have it on hand to read myself and also to know exactly what is allowed.  I have also added a link to the IRS website publications page on my website, so that homeowners who might visit my site can check it out directly from the source. 

Patricia ~ I've had this info on my website for a couple of years.  The IRS Publ 523 is indeed the one to refer to.  Staging falls into the category of selling expenses for the homeowner.  Not every transaction or sale is the same, and only a tax professional can advise you as to whether a particular sale qualifies.  It's definitely worth mentioning the benefit to potential clients.

Michael:  You're welcome.

Connie:  As far as I know "cost basis" just means figuring out how much the house cost you when you bought it after all incurred buying expenses are accounted for.

Kathy:  Don't mention it.  Thanks for shining a light on the Kansas article.

In a comment by my buddy Yvonne Root Northern Arizona Home Stager directs us to Craig Schiller's definitive blog last summer on the subject.  How did I miss that one I don't know.

Maureen:  Thank you.  Yes, IRS Publication 523 is useful in putting Staging under selling (advertising) expenses, but what about all the fixing up done to ready a home for sale.  These are often done by Stagers and are sometimes called out in my Staging contracts.  Shouldn't these expenses be deductible as well? 

Julianne Hind's http://www.roomspinners.com/  blog above (Staging "cents") links to http://realtytimes.com/nl/nlpages87/1taxbreaks.htm?opendocument&ID=alanbpeoples which says,  "Cost typically stemming from decorating or repairs -- painting, wallpapering, wallpaper removal, planting flowers, maintenance, and the like -- are also selling costs if you complete them within 90 days of your sale and with the intention of making the home more saleable."

Pat, thanks for putting together so much information on this subject. And just think, when you talk to any single IRS employee he or she will have a different answer. ;) Your advice to check with your tax-preparer is the key to making sure we get this done right. That having been said, your suggestion concerning mentioning this possible tax deduction to all we meet is perfect! It would even make sense to prepare hard copy marketing material to give to all you meet. Since this is the tax season it will have more impact right now but will be good year round. 

I wish that most of my sellers were making a profit so that they could take advantage of this.  Many are claiming a significant loss.  I tell everyone this information, with the caveat about checking with their CPA, but most say...have to have a profit to take a deduction.  It's sad but it's part of the real estate cycle.  Been there, done that. 

God,  Is any one else experiencing a head spinning 180 degrees?  I would gladly compensate someone who can put this tax issue into a concise and simple formula.

Hello all,

 Would the above information be correct in Canada. Most of the Realtors pay my staging fee would that be  under advertising expenses? Would a staging of a corporate rental be a deduction?

I have so many questions!

Hello all,

 Would the above information be correct in Canada. Most of the Realtors pay my staging fee would that be  under advertising expenses? Would a staging of a corporate rental be a deduction?

I have so many questions!

I Believe it is deductible but there is a time limit prior to the sale, check IRS regs on that one.  YEAH!

Hi Patricia, Thanks for siting my blog, Staging Cents... Is Staging Tax Deductable... the post does point to an informative article on how a homeowner benefits when it comes to taxes when her home has been staged.... in the form of capital gains... Staging is also seen these days as a better alternative to readying the house when compared to costly renovations (not repairs) in the sense that some homeowners might OVER IMPROVE their home in relation to their market! - Julianna

Yvonne:  Thanks. 

Ginger:  Yeah.   Now, everyone who's experiencing this part of the cycle now will have stories to tell, not just the older folks among us!  It will get better, though.  It is a cycle.  Some say late 2008.  Others say 2009 or 2010 even before it gets better, but it will cycle around again. 

Sharon:  It's not you.  Some would dismantle the IRS just to simplify taxes.  Not a bad idea IMHO!

Marilynn:  I know nothing about taxes in Canada.  Please add anything you find out. 

Julianna:  Great point!  We Stagers are a MUCH better alternative when readying a house for sale than Henry and Henrietta Homeowner remuddleing the property into a Handyman Special, at a much great expense usually I might add than Staging would EVER cost.  And, it's only fair and logical that our services be deductible IMHO!

Patricia: Thank you for your very well written and informative post about tax benefits of staging. BTW, I love you new photo.

I first wrote a post on this just about a year ago now. Because of the popularity of the post... I turned it into a handout that anyone is welcome to print and use.

Just click on the above image. It will explan EXACTY how it all plays out based on IRS publication 523. 

Craig

WOW, what a great selling feature this would be.  I wonder if Canada has anything like this?  I'll have to look into it right away.

Thanks for bringing up this subject again. And CRAIG, thanks so much for the flyer. It is immediately going into the packet I give to realtors and homeowners when I meet with them to provide a pricing proposal for Staging their home.

Amazing - for you Americans. I just checked with my hubby who is a Chartered Accountant and apparently staging is not tax deductable here in Canada. bummer!

I did the same Kimberley, but was told the Realtor can claim it, or the seller if it is a cottage and not the primary residence. I was very excited for a few minutes!

Craig:  Great flyer!  Well written and concise.  Difficult to do with such a cumbersome topic.  Well done and thanks for your enormous generosity in sharing your knowledge and talent.  This is what Active Rain is all about!!!

Nicola and Kimberley:  Does cottage mean vacation or part year home?  And, is staging deductible for those but not main residences? 

Everyone:  Where are we on claiming painting, plumbing, other fix ups for the purpose of selling? 

This is one of those things that I knew, but always neglect to mention!  Not any more.  Thank you!

Kim Dillon, Creative Eye Home Staging

Yeah, Craig, thanks for sharing.  Cute flier.  Great topic and often forgotten. 

Love the flyer Sir Craig developed!

all the best,

Beth

Patricia,  IRS publication 523 states that advertising fees are considered a selling expense, which is tax deductible.

I believe it would behoove all stagers to state that staging fees MAY be considered advertising expenses and that the homeowner should consult their tax specialist. 

I have stated this in the slide show I've been using when making presentations in real estate offices.  I think it's best to cover ourselves and use the words MAY be deductible and not IS deductible since characterizing staging fees as an advertising expense is subject to interpretation.

Adveritising expenses have traditionally applied to ads and signs.  Staging is a recent phenomenon.  A homeowner could get audited and an IRS agent may feel that staging is stretching the definition of advertising expense.

I'm not saying abandon the idea when marketing staging, just proceed with caution and cover yourselves.

Patricia,  IRS publication 523 states that advertising fees are considered a selling expense, which is tax deductible.

I believe it would behoove all stagers to state that staging fees MAY be considered advertising expenses and that the homeowner should consult their tax specialist. 

I have stated this in the slide show I've been using when making presentations in real estate offices.  I think it's best to cover ourselves and use the words MAY be deductible and not IS deductible since characterizing staging fees as an advertising expense is subject to interpretation.

Adveritising expenses have traditionally applied to ads and signs.  Staging is a recent phenomenon.  A homeowner could get audited and an IRS agent may feel that staging is stretching the definition of advertising expense.

I'm not saying abandon the idea when marketing staging, just proceed with caution and cover yourselves.

Forgive me if this has already been highlighted somewhere else...

I just read Craig's flyer and it is written exactly as I understood it to be. (very nice presentation BTW) That the staging expense could be used to offset the amount of capital gains.

Pub 523 states:

"If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed.

You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons. "

So when I inquired about this to many people , they all said that most people will not make $250,000/$500,000 on the sale of their homes, therefore the deduction(really an offset) would not be a factor.

Does that make sense? Well to be honest, I have a difficult time understanding it. But what I did understand was that I could not say it was a tax deduction - that would be incorrect. What I could say was that staging fees could be used to offset your capital gains ( and then pray that they didn't ask what I meant - LOL!)

I also think that if REA can deduct our fees (essentially we are free to them) it even makes more sense for them to use our services.

Donna:  Your advise is well taken.  One should ALWAYS proceed with caution when interfering, I mean interacting, with the IRS!!  BTW, your name probably shows up in black when you are not logged in to A/R.

Cari:  Many people who bought their homes before the housing bubble of the last decade WILL realize a substantial capital gain when they sell, and it's great to know that there is the $250/$500k tax break in place.  Before, you had to pay 28% of whatever capital gain you realized. 

For example, my mom bought a home in 1961 for $18,000.  She sold it in 2003 for $325,00, realizing $307,000 in capital gains.  It was wonderful not to have to pay taxes on but $57,000 of that!  Now, the question is:  Would she have been able to deduct the expense of Staging from that taxable $57,000 as an offset to her capital gain?  

I think in her case she would be able to deduct her staging expenses from the $57,000 - that would be where it would work. But here in Michigan, where people are barely being able to get what they owe for their house, it isn't any benefit to them. So I stopped touting it, but I know that if I find myself in a situation that resembles your mom's then I would mention it.

I wonder about real estate investors/flippers if it is able to benefit them? or no because it isn't their primary residence?

Super thanks for the post and everyone who contributed info! I totally forgot this is a benefit for sellers & agents! I have been 1090 before by agents who paid for it to sell their investment properties, so I assume that it can be tax deductible for agents.

Cheers,

Cindy 

UPDATE:  I'm visiting my son who just finished his course in Real Estate Law at VA Tech, and he says that COST BASIS = PURCHASE VALUE + IMPROVEMENT VALUE (I.E. PURCHASE PRICE PLUS THE COST OF ANY IMPROVEMENTS)  That means for example, if you spend $5K on a bathroom renovation that increases the value of the property by $50K, for the purposes of Cost Basis you use the $5K, not the $50K and add it to whatever you paid for the place.  Got it?

Oops!  I wasn't logged in.  My son's laptop's keyboard mouse is a PAIN for me!!!