Claudia Jacobs for Times-Herald Record writes: My last column, (Click Here to See) which explained how home-staging costs are tax deductible, went viral. For years I have been telling clients, Realtors and attendees of my classes that staging is tax deductible. No one really could explain how. Thanks to Rob Unger, CPA, CFE of Judelson, Giordano & Siegel CPA, P.C., we know the answer.
To recap
According to Unger, "Home sellers can benefit from home staging, as the fees for staging services can be considered as advertising costs, according to IRS guidelines. Since a home stager prepares your house for potential homebuyers, the IRS considers the service as an advertising expense, as long as the home stager has been hired for the sole purpose of selling your home. The costs of staging are subtracted from the proceeds of the sale of the home and decrease the total realized profit. In summary, the IRS' position is that staging costs are a legitimate selling expense for both primary and secondary homes and are therefore tax deductible. However, it is important to note that if a house is staged and then taken off the market, the staging expenses are not tax deductible."
A real estate broker's question
Ron Garafalo, real estate broker and sales manager of Better Homes and Garden Rand Realty in Goshen, asked questions at a broker's luncheon at a house I staged.
Garafalo asks, "At Realtor Diane Blanton's broker's luncheon, you mentioned that staging is tax deductible to the seller. My main question is, how is it deductible? Is it deductible off their income where if they made $50,000 as income, and paid $1,000 for staging, does their income drop to $49,000? Or, if they pay $1,000 for staging, is it not deductible from their income, but instead is deductible from their home purchase price/repairs in regards to their gain on their house sale? Does it come into play much, as most homeowners do not pay a tax on their sale?"
A CPA's answer
"I think I will try to answer Ron's questions first by using an example of what his thinking is. If a person has income of $50,000, let's say from W-2 earnings, and paid $1,000 for staging costs, are they taxed on $49,000? The answer is no, they are taxed on the $50,000 of W-2 earnings, as there is no direct offset or itemized deduction for staging costs. The staging costs must be related to the sale of a home and are deducted as selling expenses. Ron also makes the point that it does not come into play much as in the sale of a principal residence; if certain conditions are met, a single taxpayer can exclude up to $250,000 of gain, and a joint filer can exclude up to $500,000 of gain," says Unger.
Stage the home properly from the beginning. Price it right. Get it sold.