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 $318.
Evan considered that a good result.
The moisture under the kitchen sink turned out to be a slow leak around an old shutoff valve. The plumber replaced it, tightened something else Evan couldn’t see, and told them the cabinet underneath would dry out.
“Nothing major,” he said.
Evan paid him before he left.
Daisy stood in the kitchen looking at the open cabinet.
“Three hundred eighteen dollars.”
“That’s not bad.”
“For something we didn’t know was broken yesterday.”
“It was in the inspection report.”
“It said moisture.”
“Which turned out to be a leak.”
Daisy looked at him.
“You seem pleased.”
“I was expecting worse.”
She closed the cabinet.
“That feels dangerous.”
For a while, the house behaved.
Then the garage door started shuddering on the way down.
Two rollers.
$189.
A few weeks after that, the air conditioner started making a noise.
Not a loud noise.
More of a tired one.
Evan stood under the vent.
Daisy was reading on the couch.
“Do you hear that?”
“No.”
He waited.
There it was again.
“You don’t hear that?”
“I hear the air conditioner.”
“It sounds different.”
Daisy looked up.
“You’ve lived here six weeks.”
“I know what it sounded like yesterday.”
She went back to her book.
The air was still cool.
Evan checked the thermostat anyway.
Seventy-four.
He lowered it to seventy-two.
A few seconds later, the system came on with the same strained hum.
Daisy looked over.
“Okay. Now I hear it.”
“Thank you.”
“That didn’t make it better.”
The HVAC technician came Monday.
The system was old. They already knew that from the inspection.
He checked the condenser outside, opened a panel, tested a few things, and told Evan they needed a new capacitor and some maintenance.
“But the system itself?”
“It’s old.”
“Does it need to be replaced?”
“Not today.”
Evan waited.
“That means?”
“Could run another few years. Could die next summer. Hard to say.”
“Nothing major?”
The technician smiled.
“Not today.”
The bill was $486.
That evening, Evan opened the spreadsheet he had used before they bought the house.
He hadn’t looked at it since closing.
Purchase price.
Mortgage.
Property tax.
Insurance.
PMI.
Then, farther down:
Maintenance: 1%
One percent of the home’s value per year.
A clean annual assumption.
Evan had liked that number.
It let him put maintenance into the model without knowing what would actually need maintenance.
Daisy walked in carrying two paint samples.
“What are you doing?”
“Looking at what I budgeted for the house.”
“And?”
“I budgeted for repairs.”
“That sounds good.”
“It felt more organized in here.”
He pointed at the spreadsheet.
Daisy set the samples on the table.
“How much have we spent?”
Evan opened the other file.
The plumber.
The garage door.
The HVAC.
A few smaller things from the hardware store.
None of the numbers was frightening.
That was almost the problem.
They arrived one at a time, attached to things that had worked the day before.
Evan looked back at the one-percent assumption.
Maybe the annual number would turn out to be reasonable.
It just didn’t arrive annually.
Daisy picked up one of the paint samples.
“I still want to paint the kitchen.”
“That one I can handle.”
“And eventually the floors.”
“Eventually.”
“And the wall.”
Evan looked at her.
“What wall?”
She smiled.
“Good.”
There were things they wanted to do to the house.
Then there were things the house decided first.
For now, the second list was winning.
A few days later, Daisy brought in a flyer that had been left at the front door.
“Do you want this?”
Evan glanced at it.
Solar panels.
He almost said no.
Then he saw the line across the top.
30% FEDERAL TAX CREDIT
He took the flyer.
Daisy watched him.
“I knew that part would get your attention.”
“It got my attention.”
“Same thing.”
Evan looked through the numbers.
Estimated monthly savings.
Financing options.
A system size he didn’t yet understand.
At the bottom was a phone number for a free quote.
He looked toward the ceiling.
“The HVAC is old.”
“I know.”
“And the inspector said to watch the roof.”
“I know.”
“And now you want solar.”
“I handed you a flyer.”
Evan looked at it again.
“A tax credit doesn’t make it free.”
Daisy picked up her paint samples.
“I didn’t say it did.”
He set the flyer beside the repair invoices.
“I might get a quote.”
“I also didn’t ask you to do that.”
“I know.”
By the end of May, Evan had started keeping the house paperwork in one place.
Closing documents.
Inspection report.
Invoices.
Receipts.
He still planned to scan everything.
He had been planning to scan everything for several weeks.
One evening, he came home and found a folder on the dining table.
Daisy had written one word across the front.
HOUSE
Inside were the plumber invoice, the garage-door receipt, the HVAC bill, and a handful of smaller receipts Evan had left around the kitchen.
The solar flyer was there too.
Behind all of it was a paint card.
Evan pulled it out.
Daisy was at the sink.
“What’s this doing in here?”
“That one’s for later.”
“How much later?”
She turned around.
“Nothing major.”
Evan laughed.
He put the paint card back in the folder.
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.