The IRS & The Black, White, & Greys of Home Staging

Rather than take rumor as truth, I called the IRS to get an answer from the 'horse's mouth' on whether or not home staging to sell a property is tax deductible.

I spoke with Mike, a surprisingly personable customer service agent, who didn't know much about staging, but spent a great deal of time researching my questions. During the course of several days of intermittent conversations, he did confess that his wife gave him insight on what staging was from HGTV. Fortunately, he was interested to learn more about my business services for his resource repertoire. He also consulted with an IRS attorney for additional input. While I was hoping for a simple, black and white answer, here is what I learned:

• There is a lot of grey area within the IRS. There are no specific codes directed specifically to Staging. The closest code addresses real estate selling expenses and is referenced in IRS Publication 523.

• That being said, the IRS' position is that Staging is a legitimate selling expense for primary and secondary homes and therefore tax deductible.

• As my business also provides decluttering/organization services in preparation for selling a house, I did ask if those fees were tax deductible as well. Mike said yes, with the caveat that it came down to common sense, logic, and judicious use of how those services are used—for selling a house, not personal convenience—in case of an audit.

• When asked about the deductibility of furniture rentals, he said if a property is vacant, yes. If a client is living in the house and using furniture rentals while the house is for sale, no.

• If the house is staged and taken off the market, staging expenses are not tax deductible.

• Cost basis adjustment versus selling expense was also discussed. He said cost basis adjustments are referenced as permanent improvements which add value to a home such as a roof, landscaping, central air, new fence, etc. Those are not tax deductible. Minor repairs or cosmetics to get a house ready for sale are a selling expense and are tax deductible.

To recap, according to the IRS:

• Professional staging services are tax deductible

• Decluttering and organizing services are also deductible, as long as judiciously used for preparing a house for sale.

• Contracting services and repairs are in the grey area and depend on facts and circumstances. Home improvements—no; minor repairs to prepare a house for sale—yes.

While it was enlightening talking with a friendly and informative IRS rep, as you hear in disclaimer-ville, "I'm not an attorney or CPA," so please discuss your specific circumstances with your own professional. That's the black, white, and grey of it.

©2010 catherine lenard