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One question that I get frequently is this: should we add-on to our home or should we sell it and buy a larger one?

My answer is … it depends! It will certainly depend on both your personal and your financial goals. What do you want to achieve with the renovation or with the move?

There are important tax implications to your decision. Read more at the end of this article.

Houses are usually designed to be the size they were originally built. When you add additional rooms your traffic flow might become awkward and your home could decrease in value. On the other hand, an addition could open up a closed floor plan and make it more functional and highly desirable in the eyes of a buyer. That, in turn, would increase your home’s value. I am happy to come by at any time to make recommendations on where you will get the most “bang” for your buck. We know what makes a difference in today’s market. We can advise you where to spend your time and your dollars on improvements and help you make the right decisions.

Add on or move? We can help you make the right decision.

Add on or move? We can help you make the right decision.

Another issue that might come up is whether or not you are overbuilding for the anticipated values in your neighborhood. You need professional guidance to make that determination … don’t rely on what you find in the well-advertised real estate value websites. Most often, those sites are looking at the broad picture only. I can fine tune that picture and focus on your immediate neighborhood. We are immersed in the real estate world on a day to day basis, and we have the pulse of the marketplace! When I meet with you, I can familiarize you with comparable competing homes and with sales in your immediate price point and area. I can tell you whether or not you will be over-improving for the neighborhood.

Every situation is different. If your lot is exceptional because of its location that could be a huge factor. If it’s on the water or on a golf course, it will have a lot of desirability. Supply and demand will dictate what makes sense and what does not.

Not sure which way to go? Let us help. We have a list of contractors who have done work for many of our clients and have received rave reviews.

Let’s have a conversation. My 30 years plus of experience will help you make the best business decision. Call or Email Cathi at The Lund Group …

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Tax Implications

The following paragraphs were written by my personal tax consultant, Earl W. Morrow, CPA, PC. We firmly believe in using the best professionals when it comes to our business! You can reach Earl at his office, 770-642-9855.

If you decide to undertake the renovation or addition, be careful to carefully document your basis in what was spent for the improvement.   You will need that information eventually when you sell that home for this reason:  since 1997 homeowners who sell a principal residence that they have occupied as their principal residence for 24 of the 60 months preceding the sale can exclude up to $250,000 of the gain on the sale of that home ($500,000 on a married filing joint return) from taxable income!

You cannot declare this type of exclusion from income any more often than every two years.

To determine what your gain in the home you sold actually was you must document purchase price, cost of all capital improvements  and costs to sell your home. If you have more gain than the $250,000 ($500,000 married filing joint) your ability to document your basis becomes tax dollars saved!

Adequate documentation consists of  Invoices for  materials and labor from contractors and vendors and  canceled checks, charges to credit cards or other proof of the payment of the invoice.

Borrowing the funds to finance the improvement or renovation can and usually is from HELOC or equity line loans secured by the residence. If not secured by the residence, the interest paid is not deductible.  The interest on HELOC debt in excess of  $100,000 or first mortgage debt in excess of $1,000,000 is not deductible. If borrowed to renovate or improve your  principal residence, that debt is considered  acquisition debt and may be deducted from regular taxable income and from Alternative Minimum Taxable Income.