Do NOT Pay Sales Tax on Capital Improvements to Your Home!

Oh man, I have a new favorite toy. It’s called salestaxhandbook.com and is just LOADED with information on sales tax through the US.

You can find the site here. https://www.salestaxhandbook.com/sales-tax-changes

Did you know in many parts of New York there is going to be a doubling of the sales tax in October 2018?

Many parts of GA and NC raised their sales tax too in Sept. 2018. Who knew? I certainly did not.

But with this tool, now I do. And I love it.

I will definitely be incorporating a lot of this into my soon to be released e-book “State by State Guide to Sales Taxes” .

So stay tuned!

You have a contractor quote you a price for replacing your floors. You notice there is a $900 fee for SALES TAX.

What do you do?

You tell him to pound sand.

Depending on the state you live, capital improvements are NOT subject to sales tax. And what is a capital improvmeent?

Well, let’s just use the New York state definition.
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“A capital improvement is an addition or alteration to real property that:
• substantially adds to the value of the real property, or
appreciably prolongs the useful life of the real property;
• becomes part of the real property or is permanently
affixed to the real property so that removal would cause
material damage to the property or article itself; and
• is intended to become a permanent installation.”
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What does that include? Well, pretty much anything that improves your home. Ripping out carpet and installing hardwood floors. New HVAC. New deck, roof. Etc.

You name it, if it is improving your home, permanently it’s a capital improvement.

Sanding and painting your cabinets? No. Repacing the cabinets. Yes.

Below I give you links to the NY and NJ docs that specifically state what are considered capital improvements.

I also link you to the Popular Mechanics podcast from which I learned this.

Remember, the material used to make the improvements, the flooring itself MAY be subject to sales tax. It’s the labor, i.e., the service, that is not.

https://www.popularmechanics.com/podcasts/
https://www.state.nj.us/treasury/taxation/pdf/pubs/sales/su2.pdf
https://www.tax.ny.gov/pdf/publications/sales/pub862.pdf
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