Claudia Jacobs, a fellow RESA member (Real Estate Staging Association), interviewed Rob Unger, CPA, CFE of Judson, Giordano & Siegel, CPA, P.C., to clarify how the IRS interprets staging costs and if any are tax deductible, and provided this enlightenment. She said Unger described, "Home sellers can benefit from home staging, as the fees for staging services can be considered as advertising costs according to IRS guidelines. Since a home stager prepares your house for potential homebuyers, the IRS considers the service as an advertising expense, as long as the home stager has been hired for the sole purpose of selling your home. The costs of staging are subtracted from the proceeds of the sale of the home and decrease the total realized profit. In summary, the IRS' position is that staging costs are a legitimate selling expense for both primary and secondary homes and are therefore tax deductible. However, it is important to note that if a house is staged and then taken off the market, the staging expenses are not tax deductible."
Questions for the CPA
This is great news, but Claudia wanted to get further clarification as the word "staging" is a very broad statement and can be confusing. Claudia then asked if fresh white towels, new shower curtain, home repairs, paint, new carpeting, furniture or furnishings -- either rented or purchased -- can qualify under the IRS definition of staging allowed tax deductions. She also asked if there's an IRS difference if the Seller buys the furniture and decor, or if they rent the furniture and decor from a stager.
And further questioned if the home goes off the market for a few months, then goes back on, is the Seller still allowed to claim it as a tax deduction? For instance: Sellers didn't want to put in new carpeting, but had no offers while it was listed so they took the home off the market for the winter. Then decided to install carpeting, home back on market and then it sells.
CPA Rob Unger replied, "With regard to the timeline, the costs of staging are only deductible if the home is for sale and actively on the market. If the home is on the market, then taken off without a sale, the cost of staging (prior to it taken off the market) is not deductible.
"The IRS does not allow you to deduct expenses for repairs, maintenance and upkeep on your main home, so these expenses cannot be subtracted from the sale of your home. Fresh paint, new carpet, furniture and home decorations are not tax-deductible expenses, even if a home stager recommends them.
"In your example of the home being on the market, coming off, then going back on and selling, they are considered separate transactions. If there are staging costs associated with the first time it is on the market and then comes off with no sale, no deductions are allowed for the staging costs. Any staging costs associated with the property going back on the market and selling are deductible as it relates to that transaction.
"Staging is typically what happens after the homeowner has cleaned, painted and made minor repairs. It's the cost of the stager's services in dressing up the home to get it ready for sale.
"In your example, when the homeowner is buying the fresh white towels and furnishings, these are not tax deductible, as after the sale is completed, the homeowner is most likely going to take these items with them. If these are part of a stager's services and the stager rents these items to the homeowner, and it is included in the stager's invoice for services, and they are retained by stager after the home staging is completed, then they will be tax deductible as staging expenses.
Unger continues, "I think a literal explanation is that the tax-deductible part is what is on the invoice from the stager. Items that the homeowners buys and intends to keep that are used in the staging process are not deductible, as they are being used for staging and then also for personal use after the staging making them non-deductible. Items they rent for the staging process and then return to stager after the home sells are deductible as part of the staging, as homeowner does not use them for any personal use, they are used strictly for the staging process."
If you initiate a conversation with your CPA to see if the IRS tax deduction can be applied to your circumstances, ensure you advise your Realtor as well. Your Realtor can help you determine the proper market price of your home. The IRS home staging cost tax deduction places importance on pricing the home right the first time, so the property doesn't bounce on and off the market, jeopardizing staging tax deductions and extending the home's market time.
Staged right. Priced right. Sold!
I'm Ululani and have been staging homes in Hilo since 2013. I'm passionate about staging, design, color and photography. I'm also about slow food free of pesticides, chemicals and genetically modified organisms for healthy balanced living for our 'ohana and communities.