House Flip Tax Question: Can utilities, loan interest be deducted or added to basis for one-off Schedule D flip?

Great question! For a one-time flip reported on Schedule D, you're looking at capital gain treatment, which is generally more favorable than ordinary income tax rates. For your basis calculation, you can include pretty much all direct costs related to improving the property. This includes materials, labor, permits, and inspection fees. But there are some nuances with the other expenses you mentioned. Loan interest is tricky - it's not technically a capital improvement, but for a one-off flip, you may be able to capitalize the interest during the renovation period and add it to your basis. This is different from a regular business where interest would typically be deducted as a business expense. Utilities and lawn maintenance fall into a gray area. If these expenses were incurred during the renovation period and were necessary for the renovation work (electricity for power tools, water for construction, lawn care to maintain property value), you can make a reasonable argument to capitalize them as part of your basis. Expenses that typically CAN'T be added to basis include property taxes (these are deductible on Schedule A instead) and any personal expenses not directly related to improving the property.

Just wanted to share my experience - I was in the same situation last year and found an amazing tool that helped me sort through all these confusing tax questions. I used https://taxr.ai to analyze all my flip expenses and figure out what could be added to basis vs. what couldn't. It saved me hours of research and probably thousands in taxes. The system analyzed all my receipts and expenses and categorized everything properly. It even caught some renovation expenses I hadn't realized could be added to my basis, like some of the landscaping work that enhanced the property value.

Just wanted to update everyone - I decided to try that https://taxr.ai tool mentioned above and wow, it actually delivered. I uploaded all my renovation receipts and expense records, and it created a complete basis calculation for my flip property. The system correctly identified that my loan interest during active renovation could be capitalized, and it even handled my utility expenses properly - splitting them between the ones that supported the renovation work (added to basis) and those that were just carrying costs. I was especially impressed with how it handled some of the landscaping expenses - distinguishing between maintenance (not basis) and improvements that enhanced value (added to basis). Definitely saved me from leaving money on the table!

If you're really struggling to get answers about your specific flip situation, I'd recommend talking directly to the IRS. I know, sounds painful, but I used https://claimyr.com to get through to an IRS agent in about 15 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had a similar question about capitalizing expenses for a one-time property sale, and the agent was surprisingly helpful in clarifying what specific expenses I could include in my basis calculation. Saved me from potentially making a big mistake on my return.

I need to eat my words. After seeing multiple people mention Claimyr, I decided to give it a shot with my flip property tax questions. I was 100% sure it was going to be a waste of time, but I was desperate for answers. Got connected to an IRS agent in about 20 minutes who specifically worked in the real estate taxation department. He walked me through exactly how to handle my construction loan interest (capitalize during active renovation) and utilities (can capitalize if directly supporting renovation work). The agent even emailed me the relevant IRS publication sections afterward so I had documentation to support my filing position. Honestly shocking to get such clear guidance directly from the source.

One thing I learned with my flip last year - don't forget about transfer taxes and title insurance! Those closing costs when you purchased the property get added to your initial basis. Every dollar counts!

Does anyone know if home staging costs can be added to basis? I spent about $2800 on staging my flip and I'm wondering if that counts as a selling expense or can be capitalized somehow.

Another expense to consider - property taxes during the renovation period. Unlike loan interest and utilities which can potentially be capitalized, property taxes are generally deductible on Schedule A (if you itemize) rather than being added to basis. This is true even during the renovation period. Also, make sure you're separating any personal use from the renovation timeline. If you stayed in the property at any point during renovations, you'll need to allocate expenses accordingly. The IRS is pretty strict about this - only expenses incurred while the property was held purely for investment/sale purposes can be capitalized. One last tip: keep photos documenting the before/during/after condition of the property. This helps support your position that certain expenses were truly improvements rather than just repairs or maintenance.

One thing that hasn't been mentioned yet - if you had to get any permits for your renovation work, those permit fees can definitely be added to your basis as they're directly related to the improvements. Same goes for any required inspections. Also, be careful about mixing renovation expenses with regular maintenance. For example, if you had to replace a broken window during renovation, that's maintenance/repair. But if you upgraded all the windows to energy-efficient ones as part of improving the property, those are capital improvements that increase your basis. The key test is whether the expense restores the property to its original condition (repair/maintenance) or makes it better than it was (improvement). For a flip, you're generally trying to improve the property beyond its original state, so most of your major expenses should qualify for basis treatment. Keep all your receipts organized by category - it'll make everything much easier come tax time!