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STRATEGIC ISSUES...ONLINE 
For week of May 22, 2006, Issue #263
 
Featured Articles:
1.  The Tax Impacts of Remodeling
2.  Tech Tip Weekly:  How to Close Error Reporting in Windows XP
3.  Compliance Calendar
 
 
If you would like to have further information on any of these articles, let us know.  We would appreciate receiving your comments and/or suggestions, anytime!
acarroll@pmcpa.com
 
1.  The Tax Impacts of Remodeling
 
Walk around your neighborhood and you're likely to see homes being remodeled.  Perhaps you, too, are considering a new deck, kitchen or bathroom this spring.  If so, understand the tax consequences.
 
If your project qualifies as an improvement to your home, you'll enjoy some tax benefits.  But if the project is a repair, there's generally no tax benefit.  It's not always easy to tell the difference.
 
An improvement is defined as something that adds value to your home or extends its life.  So putting in a new kitchen, building an extension, or adding a new deck are improvements because they add value.  Replacing the roof is an improvement because it extends the life.
 
A repair, on the other hand, merely keeps the home in good working order.  Examples include painting inside or out or replacing a few missing shingles.
 
The tax benefits arise because you can add the cost of your home improvements to your original cost basis.  That's the amount you first paid for the home.  When you sell, a higher cost basis means a smaller capital gain.  And generally you'll pay tax on a capital gain greater than $500,00 ($250,000 for singles).  So the smaller your capital gain, the less likely you are to owe tax when you sell.
 
That's why it's important to save bills and receipts for any projects that may qualify as improvements.  Make a note of what they were for.  You may need to keep these for years until you sell your home.  But when you do, they could be the key to reducing your tax bill.
 
If you want to know whether your project is a repair or an improvement, please contact our office.
 
 
2. Tech Tip Weekly:  How to Close Error Reporting in Windows XP
Error reporting, what is it and why does Microsoft want you to have it on?  Basically whenever your computer crashes Win XP makes a little report of what went wrong and then sends it to Microsoft so they can improve the Windows Operating System.  Generally it sounds like a nice idea, but do you really want to be sending reports about your computer to Microsoft?  I personally don't and they allow you to shut off this feature.  Here's how you do it:
  1. Open your control panel
  2. Click on Performance and Maintenance
  3. Then click on System
  4. Go to the Advance Tab
  5. Click on the Error Reporting button at the bottom
  6. Select Disable Error Reporting
  7. Click the "But notify me when a critical error occurs"
  8. Click Ok Twice.

You can leave out step 7, but I like my operating system to tell me when its had a major error, mainly because I can look up the cause of the error and hopefully find a solution to it on the net or at Microsoft.  There you have it, error reporting to Microsoft is off and you don't have to worry about sending a report to Bill Gates.

 

3.  Compliance Calendar

May 24
-Employers deposit Social Security, Medicare, and withheld income tax for May 17, 18, and 19.

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