Using the tax code to pay for upgrades to my dream home (hopefully)

[Neil Polehn]

Hey All,

I just used a cash windfall to buy my dream home in San Jose for 1.6M and, as it was very dated inside,  I am spending 200K to dramatically upgrade the kitchen, bathrooms and flooring with premium materials and using the tax code to write it all off.  Here is my plan.  I am going to keep my condo and rent out (2) rooms of the SJ house to friends in the Fall of 2023 to show it as a rental.

Since I am receiving income from the SJ house and keeping my primary residence, I can write off my improvements in 2023 and in 2024, after I have finished the upgrades, I will rent out my condo and move into the SJ house and make that my primary residence. This should allow me to carry all the upgrades I made as capital gains losses to write off against any future income I have.  Also, since I am using an interior decorator and spending on kitchens and bathrooms mostly, I believe I should get most, if not all, of those money back as equity.

So, in 2024 I will move into my dream house and rent out my condo, having had a great time designing and improving my dream home.  I dont see any flaws in this plan so hopefully there are not:)

Neil