Is The Cost of Home Staging Tax Deductible?
Selling a home can be an exciting yet challenging process. As a homeowner or Savvy Real Estate agent, you want to maximize your chances of attracting potential buyers and securing the best possible sales price on your listing(s). One effective strategy to achieve this is through the art of home staging. Home Staging helps homes stand out in a crowded market and differentiates which listing agents will go the extra-mile to help ensure clients get the highest ROI on the sale. What's more, did you know that you may be able to deduct home staging expenses from your taxes? In this article, we'll explore the advantages of home staging for sellers and shed light on the potential tax savings that await you.
The Power of Home Staging
Home staging is the art of transforming your property into an appealing and marketable space. It involves arranging furniture, decluttering, adding tasteful neutral décor, and enhancing curb appeal to create an inviting atmosphere for potential buyers. The goal is to showcase your home's best features, highlight its potential, and help buyers envision themselves living there. We do this through understanding the psychographics and demographics of the potential buyers and tailor the staging to create emotional connection points throughout the home.
Barb Schwarz, ASPM®, IASHP® and The Creator of Home Staging®, provides the following information from CPA/CFE Rob Unger of the accounting firm Judelson, Giordano & Siegel, P.C.
“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.”
The Benefits of Home Staging
There are several benefits to Staging a Home for Sale, some of these benefits are:
Faster Sales: A well-staged home captures buyers' attention, making a lasting impression and increasing the likelihood of receiving attractive offers. Staged homes tend to spend less time on the market, expediting the sales process.
Higher Sale Price: By presenting your home in its best light, you can create a strong first impression that often ups the perceived value of the home and potentially attracts multiple offers. Competition among buyers can drive up the sale price, resulting in a more profitable transaction. According to National Association of Realtors, 20% of Buyers and Seller’s agents said that Home Staging increased the dollar amount offered by 1-5%.
Increased Buyer Interest: Staging helps create an emotional connection between potential buyers and your property. It allows them to visualize themselves living in the space, which can significantly increase their interest and likelihood of making an offer.
The Tax Benefits of Home Staging
Here's the exciting part: as a home seller, you may be eligible for tax deductions on your home staging expenses. While tax laws and regulations can be complex, the Internal Revenue Service (IRS) allows deductions for expenses that are "ordinary and necessary" for selling your home and marketing the home.
To potentially qualify for tax deductions, consider the following guidelines:
Directly Related to Selling Your Home: The home staging costs should be directly connected to the process of marketing and selling your property.
Reasonable and Necessary: The expenses incurred for home staging should be reasonable and necessary for making your home more marketable. Extravagant or excessive costs may not be fully deductible.
Document Your Expenses: It is crucial to maintain detailed records of your home staging expenses, including receipts, invoices, and any related documentation. These records will serve as evidence and support your deductions if required.
Use a Professional: Just like you would use a Professional Real Estate Agent to sell your home, you should also use a Professional Home Stager when it comes to staging your home. The IRS will not allow for deductions to be made for items that are bought by the homeowner or the costs incurred to do the home staging themselves. Only items that a rented for the purpose of staging and then returned and not kept for personal use can be tax deductible. While it may be enticing to think that you are saving a few hundred dollars and still getting the benefits of staging, statistics have shown that after one year of living in the home property owners can not view the home objectively to be able to properly stage their home and see the benefits.
Potential Deductible Home Staging Expenses
While every situation is unique, here are some common home staging expenses that may be eligible for tax deductions:
Staging Consultation Fees: Fees paid to professional home stagers or interior designers for their expert advice on presenting your home in the most appealing way.
Rental Furniture and Accessories: Costs associated with renting furniture, artwork, lighting fixtures, and other decorative items to enhance the visual appeal of your home during the listing period.
Storage Fees: Expenses incurred for off-site storage of personal belongings during the staging process to create a clean and clutter-free environment.
Cleaning and Repairs: Costs for deep cleaning, repairs, painting, or any necessary cosmetic improvements to enhance the overall condition of your home.
Photography and Marketing: Fees related to professional photography, virtual tours, brochures, and online advertising to effectively market your staged home.
Consult a Tax Professional
While the potential tax benefits of home staging expenses can be enticing, it's crucial to consult with a qualified tax professional or accountant who can provide personalized advice based on your specific circumstances. They can guide you through the complexities of tax laws, help ensure compliance, and maximize your potential tax savings.
Tap into the power of home staging and discover the tax savings that await you!
Disclaimer: This article is for informational purposes only and should not be considered as tax or financial advice. Tax laws can and do change! Please consult with a qualified tax professional for personalized guidance based on your specific situation and what is and isn’t deductible in your State/Situation.
Information in this article is credited to Claudia Jacobs of Claudia Jacobs Designs and information furnished by Bob Unger to Claudia Jacobs and Barb Schwarz. For further information please reference IRS Publication #523 for Home Staging.
Melissa Ice is the Owner of Seven Hills Design, LLC, a Home Staging and Design Company located in Chester, VA and serving the Greater Richmond, VA area. She is a RESA-Pro Affiliate and passionate about helping sellers and agents market and sell their listings quickly and for Top Dollar. Considering selling your home and interested in Working With Us? To find out more about our Services you can reach us at 910-322-2062 or visit our Contact page to schedule a “Work With Us” Call.
