Nothing Major
MONEY MEETS TAX · EPISODE 05
Anaheim · Spring 2024
Money & Tax in this episode
Older-home repairs · Cash reserves and priorities · Basis and recordkeeping
The first repair cost $189.
It happened eleven days after they moved in.
Evan came home from work and found Daisy standing in the hallway, looking at the thermostat.
“What happened?”
“It’s seventy-eight degrees.”
He looked at the display.
“It’s hot today.”
“It’s seventy-eight degrees inside.”
Evan put his bag down.
The air conditioner was running.
Technically.
There was air coming from the vents.
It just wasn’t especially cold.
The HVAC technician came the next afternoon.
Daisy worked from home to let him in.
At 2:17, she texted Evan.
Nothing major.
Evan stared at the message.
How much?
$189.
What was wrong?
Capacitor.
Evan searched it immediately.
Daisy sent another message before he finished reading.
He said the system is old.
Evan stopped.
How old?
Old enough that he said we should start thinking about replacing it eventually.
That was less helpful.
When Evan got home, the house was cool again.
Daisy was in the kitchen.
“So we’re good?”
“For now.”
“How long is now?”
“He didn’t know.”
Evan looked toward the thermostat.
Daisy smiled.
“It’s working, Evan.”
“I know.”
“You can worry about the replacement when it stops being theoretical.”
“That could be expensive.”
“I know.”
She handed him a glass of water.
“That’s why we kept the cash.”
Evan took it.
He had argued for twenty percent down.
Daisy had argued for keeping money after closing.
He remembered this without mentioning it.
Three weeks later, the kitchen faucet started leaking.
Not badly.
Just enough to leave water around the base every time they used it.
Evan tightened something underneath.
The leak got worse.
Daisy watched from the other side of the counter.
“Should I call someone?”
“I’m fixing it.”
“Okay.”
Five minutes later, Evan turned off the water under the sink.
Daisy picked up her phone.
“I’ll call someone.”
“That seems reasonable.”
The plumber charged $245.
A month later, the garage door stopped closing all the way.
$165.
Then the dishwasher started making a grinding noise.
It still cleaned the dishes.
Mostly.
Evan searched the model number.
The dishwasher was eleven years old.
Daisy stood beside him.
“Can we just replace it?”
“It still works.”
“It sounds unhappy.”
“That’s not a mechanical diagnosis.”
“No.”
She listened to the grinding for another few seconds.
“But I’d rather replace it before it decides for us.”
Evan looked at the dishwasher.
That was harder to argue with.
They bought a new one the following weekend.
Evan started a house spreadsheet.
Daisy found out because of course she did.
“What’s this one called?”
“House.”
“Creative.”
“It doesn’t need a creative name.”
She pulled out a chair beside him.
There were categories.
Repair.
Maintenance.
Appliance.
Improvement.
Evan had also added a column labeled:
Basis?
Daisy pointed at it.
“What does that mean?”
“Some things we spend money on might matter later when we sell.”
“Like what?”
“Improvements. Things that add value or extend the life of the property.”
“And repairs don’t?”
“Usually not the same way.”
Daisy looked at the list.
“So the faucet?”
“Repair.”
“Dishwasher?”
Evan paused.
“I need to check.”
Daisy smiled.
“You made the column before you knew what goes in it.”
“I know what generally goes in it.”
“Okay.”
She leaned closer to the screen.
“What about the kitchen?”
“What about it?”
“When we eventually redo it.”
“That’s not happening this year.”
“I said eventually.”
Evan looked at her.
Daisy smiled.
“Plenty of time to figure out the column.”
By June, the house had developed a pattern.
Something happened.
Evan looked it up.
Daisy asked whether they needed to fix it now.
Evan tried to decide whether the cost was reasonable.
Then they paid someone.
None of the individual amounts were especially alarming.
That was almost the problem.
$189.
$245.
$165.
A dishwasher.
A few smaller things.
Each one seemed manageable.
Together, they were beginning to look like a category.
One Saturday morning, Evan was going through mail when he found a flyer.
SAVE 30% WITH THE FEDERAL SOLAR TAX CREDIT
He read the line twice.
Daisy was making coffee.
“What?”
“Solar.”
She looked over.
“What about it?”
“There’s a thirty-percent tax credit.”
“For solar panels?”
“Apparently.”
Daisy poured coffee into two mugs.
“Do we want solar panels?”
Evan kept reading.
“It could reduce the cost.”
Daisy handed him a mug.
“Maybe. I just want to know if we want them before we figure out the credit.”
Evan looked at the flyer again.
It advertised low monthly payments.
Energy savings.
Increased home value.
And, in very large type, the federal tax credit.
He opened his laptop.
Daisy sat down across from him.
“What are you doing?”
“Looking at the credit.”
She smiled.
“I figured.”
“It’s thirty percent of qualified costs.”
“Okay.”
“So if the system costs thirty thousand dollars—”
Daisy took a sip of coffee.
“I’m not against looking at it.”
Evan stopped.
“But?”
“But first tell me whether solar makes sense for the house. Then you can tell me what the tax credit does to the numbers.”
Evan looked back at the flyer.
That was annoyingly reasonable.
“A tax credit doesn’t make it free.”
“I know.”
“It just reduces the after-tax cost.”
“Right. So let’s figure out whether we want the thing at that cost.”
Evan folded the flyer in half.
“I was going to calculate it.”
Daisy smiled.
“I know you were.”
He put the flyer beside his laptop instead of throwing it away.
That afternoon, the washing machine made a sound neither of them had heard before.
They both stopped.
The machine shook once.
Then continued normally.
Daisy looked toward the laundry room.
Evan did too.
Neither moved.
After a few seconds, Daisy said, “Nothing major?”
Evan waited.
The washing machine kept running.
“Nothing major.”
Daisy smiled.
Evan opened the house spreadsheet.
He added a new row.
Washing machine
Then, after a moment, he left the amount blank.
The Tax Behind the Story
Most ordinary costs of maintaining a personal home do not create a current tax deduction. Repairs that simply keep the home in ordinary operating condition—such as fixing a leak or repairing an existing system—generally are not added to the home’s tax basis either. Evan’s HVAC capacitor replacement and maintenance fall on that side of the distinction; replacing the entire central air-conditioning system could be different.
Capital improvements can increase basis. The IRS describes an improvement as work that materially adds to the home’s value, considerably prolongs its useful life, or adapts it to new uses. Examples include a new roof, a central air-conditioning system, new wiring, flooring, and kitchen modernization. Even work that would normally be considered a repair can become part of an improvement when performed as part of an extensive remodeling or restoration.
That distinction may have no effect on Evan and Daisy’s 2024 income tax return. It can matter much later when they need to determine the home’s adjusted basis, which is why their purchase records and documentation for significant improvements are worth keeping.
The solar flyer introduces a different rule. In 2024, qualified solar electric property could qualify for a Residential Clean Energy Credit equal to 30% of qualified costs. Certain costs for onsite preparation, original installation, and wiring used to connect the qualifying property to the home can also be included. The credit is claimed on Form 5695.
Evan has only a flyer, though. A quote—or even buying equipment by itself—does not mean he has a credit to claim. For purposes of the credit, the qualifying property generally must actually be installed.
For now, the 30% is simply another number waiting for a decision.
Want the tax rules behind the story?
Home Repairs vs. Improvements: What Adds to Basis?
A deeper look at personal-home repairs, capital improvements, adjusted basis, remodeling projects, recordkeeping, and what homeowners should keep for a future sale.
READ THE TAX GUIDE →
Next Episode
The Number Evan Wasn’t Watching
The consulting work is growing.
So is the amount Evan is setting aside for taxes.
The two numbers are not growing at the same speed.