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Home Staging Fees are Tax Deductible? Really? Who knew?!

By Patricia Ebrahimi

Home Stager with SHOW SMART! HOME STAGING & Color Consultant

April 04, 2008 09:10 AM

“Staging as a tax deduction, hmm. That might just be enough to persuade my guy to get on board with it. Goodness knows his property needs it.” This from a prominent, top producing REA of 35 years.

If this otherwise very savvy agent didn’t know, what makes you think other REAs or home sellers do?

Kathy Passerette www.creativeexpressions.com pointed out day before yesterday (April 2, 2008) in her blog http://activerain.com/blogsview/450823/Home-Stager-Fees-Are quoting from the Kansas City Star, “Home Staging fees paid directly by the home seller to a Home Stager are tax deductible.” Thanks, Kathy.

That said, we all know what happens when you assume things, right.

As we Professional Home Stagers continue our crusade to educate everyone we can about the benefits of what Home Staging brings to the Real Estate industry in general and REAs and Home Sellers in particular, think to bring up the tax deduction probability with everyone you talk to.

After all, isn’t tax deductibility a terrific selling point for investing in Home Staging services. Most people I’ve talked to in my neck of the woods were not aware of it before I brought it up. What about you? Bring it up. Raise the question. Please, don’t just assume everybody knows!

Professional Home Staging really is an investment in selling a house, usually a legitimate tax deductible selling expense, and the IRS said so! But wait, please look into it, check with a CPA. Your case may be different, and the IRS can be so confusing. There may be particulars. We wouldn’t want you to assume anything, don’t you know…

(Are there any CPAs in the house rain? We’d love to hear from you!)

Other posts I found on the question of tax deductibility of Home Staging:

Real Estate Blog - HOME STAGING IS TAX DEDUCTIBLE Nora Marek (321 ...

Nov 25, 2007 ... Is staging tax deductible?YES! This may be old news to some, Home Staging services can be considered an advertising fee (See IRS Publication ...
activerain.com/blogsview/285195/HOME-STAGING-IS-TAX
Labeled Blogs

Real Estate Blog - Staging "Cents"... Is Staging Tax Deductible?

Julianna: I believe that if a Real Estate Agent pays for staging, it is tax deductible as a cost of doing business. I'm not sure about the home owner ...
activerain.com/blogsview/377201/-Staging-Cents-Is
Labeled Blogs

Real Estate Blog - Tax Deductible Staging?

I've heard that Home Staging services are tax deductible as part of your costs of preparing a home for sale. Is this true? Is it a national standard, ...
activerain.com/blogsview/154476/Tax-Deductible-Staging

Let’s use the Rain to get some discussion going on the subject. Please add any experience you’ve had on the question of Professional Home Staging as a tax deduction, so we can all learn. Thanks.

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Minnesota Home Staging Firm, Minnesota

Minnesota Home Staging Network~ MN's Top Home Staging Firm - Inver Grove Heights, MN

Love the flyer Sir Craig developed!

all the best,

Beth

Apr 06, 2008 05:59 PM

Anonymous

Donna Dazzo

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.

Apr 07, 2008 12:05 AM

#28

Anonymous

Donna Dazzo, Designed to Appeal

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

Apr 07, 2008 12:06 AM

#29

Cari Pilon

RE:STYLE Home Staging - Brighton, MI

RE:STYLE Home Staging

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.

Apr 07, 2008 01:31 AM

Patricia Ebrahimi

SHOW SMART! HOME STAGING & Color Consultant - Rockville, MD

Home Staging the Washington DC Area from Rockville MD

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.

Apr 07, 2008 02:27 AM

Patricia Ebrahimi

SHOW SMART! HOME STAGING & Color Consultant - Rockville, MD

Home Staging the Washington DC Area from Rockville MD

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?

Apr 07, 2008 02:37 AM

Cari Pilon

RE:STYLE Home Staging - Brighton, MI

RE:STYLE Home Staging

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?

Apr 07, 2008 03:35 AM

Cindy Lin

Staged4more School of Home Staging - South San Francisco, CA

Host, The Home Staging Show podcast

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

Apr 07, 2008 04:57 AM

Anonymous

Patricia Ebrahimi

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?

Apr 08, 2008 06:24 PM

#35

Patricia Ebrahimi

SHOW SMART! HOME STAGING & Color Consultant - Rockville, MD

Home Staging the Washington DC Area from Rockville MD

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

Apr 08, 2008 06:37 PM

Margaret Woda

Long & Foster Real Estate, Inc. - Crofton, MD

Maryland Real Estate & Military Relocation

Patricia, is Bowie-Crofton too far for you? I need to get to know some staging professionals in our area.

Dec 05, 2008 01:42 PM

Patricia Ebrahimi

SHOW SMART! HOME STAGING & Color Consultant - Rockville, MD

Home Staging the Washington DC Area from Rockville MD

Margaret: Bowie-Crofton is fairly far, but definitely not TOO far for me to help YOU, Margaret. I'd be honored. Thanks so much for asking. Give me a call and we'll set something up.

Dec 06, 2008 02:05 AM

Carol Andersen

Navarre Beach Agency - Navarre, FL

NW Floridanulls Real Estate Pro, TRC, ICREA

Great Blog! I'm just now going through the very painful process of doing my taxes and appreciate the info!

Mar 21, 2009 12:15 PM

Anonymous

Kay George

Very useful information, I am especially focused on the following statement in Craig's blog http://activerain.com/blogsview/66635/TAX-MAN-COMETH-for-Sellers-but-NOT-if-I-Can-Help-It : "However, it is important to note that if a property does not sell and is taken off the market, expenses for that transaction are NOT deductible in the future." So if I had 3 months worth of staging costs at the end of last year, my house did not sell so I took it off the market, can I deduct those costs as advertising expenses per ITS Pub 523, for tax year 2008? By the word 'future', I assume you mean that, in this example, I cannot deduct these 2008 expenses for tax year 2009 if I put the house back on the market and it sells in '09. Please clarify! Many thanks.

Mar 26, 2009 03:55 PM

#40

Joanna Lindsey

Hometown Realty - Dallas, GA

Great marketing ideas for the home staging community! I will definitely include in future presentations.

Thank you!

Mar 30, 2009 08:40 AM

Ray & Elaine Fischer

(828) Home-Stager.com & (828) Custom-Cabinets.com - Asheville, NC

this is great information tks for posting it. i will pass on the information.

Apr 08, 2009 10:57 PM

H H-S

Durham, NC

I am calling my accountant tomorrow so he can talk me through the details so I can pass it on to clients. Thanks for sharing!

Jul 15, 2009 02:27 PM

Patricia Ebrahimi

SHOW SMART! HOME STAGING & Color Consultant - Rockville, MD

Home Staging the Washington DC Area from Rockville MD

You're welcome, Holly. Please do pass on to us as well what you glean from your accountant for your clients. We can all learn from it. I'm sure. I'm anxious to hear what he/she says!

Jul 15, 2009 03:47 PM

Patricia Ebrahimi

SHOW SMART! HOME STAGING & Color Consultant - Rockville, MD

Home Staging the Washington DC Area from Rockville MD

Krisztina: I'm glad you found my blog great news. Your points on virtual staging vacants are interesting and well presented. Your information would do well as a blog in and of itself, not just in a comment on this one. Why not write one.

Jan 13, 2010 11:26 AM

Michelle Minch

Moving Mountains Design Home Staging, Pasadena, CA - Los Angeles, CA

Home Staging Los Angeles and Orange County, CA

Pat: Krisztina posted almost the exact same reply on one of my blog posts. I reported it as spam and deleted it. Its really bad manners to advertise another business on someone else's blog.

Jan 13, 2010 12:56 PM