Cap Gains or Loss on TX Inheritance Property?

[Shirley McLean]

Crossposted in Texas forum

Hi,

I'm in Texas and my dad passed away nearly 2 years ago. I inherited his home which is paid for. I've been living in it and have done heavy home renovations. I know that if I put it up for sale (before my 2yr live in anniversary), I am subject to capital gains tax on the difference between the cost basis (FMV) at the time of his death subtracted from the sale price. However the following may affect the tax.

1. I did not get an appraisal but I did get a home equity loan to do renovations. I'm assuming the cost basis will be based on that loan value on the house. I think they had to do an estimate of value for me to get the loan.

2. I'm self employed and my adjusted net income is about $25k which I read is in a cap gains bracket of 0%. Is this the case?

3. I have done at least $15-20k in renovations. Does this count as capital improvements? Does this get added to cost basis?

a. Example: House cost basis $180k, sale price $195k, cap gain is $15k, renovations $20k, cap loss is $5k

4. If I do owe 0% after the sale b/c of lower income, do I still qualify for a capital loss? Renovations included new granite in kitchen and bathrooms, new commercial stainless kitchen sink, new vessel sinks in bathroom, new tiled shower, new vanity mirrors and fixtures, new LED lighting and 4 ceiling fans throughout, new vinyl plank floors with new carpet in bedrooms, new interior and exterior pain, stained deck, new fence on 3 sides, chimney repair, new cabinet hardware and new door hardware throughout, new plumbing fixtures, added channel/french drain at end of driveway for water pooling, added drainage near front of house to divert rainwater, added landscaping beds, river rocks and pavers in backyard in shaded area where grass will not grow, replaced IG thermal glass window.