If a homeowner improves the condo they live in can the taxes paid for cabinets, flooring, etc be claimed as use tax?

[qbteachmt · Accepted solution]

Did you mean Sales tax, inbound sales tax, or use tax? Are you trying to claim something as Deduction, or because they owe it?

Use tax is, for instance, a builder that maintains roofing for customers, and also uses it on a spec home. As the End User (the spec home), he hasn't sold it to himself (so there is no Sales Tax) but he got the use of something put into stock without being taxed before use. Therefore, there is Use Tax. Or, you buy toilet paper for inventory at a quickee-mart, and also use it to stock your own bathrooms. That is Use.

Sales taxes paid on local purchases or from out of state purchases are now part of that project. That's not use tax.

[gabypositive]

Thank you for your reply. Trying to claim a deduction. Taxpayer has over $25,000 in cost to improve condo bought last year. I know the improvements to the property cannot be claimed but can the taxes paid for products (appliances, etc) be claimed and if yes would that be sales or use tax? 

[sjrcpa]

Sales tax. They only get sales tax if it's more than state tax.

[BobKamman]

Who knows?  But I think this question might involve the rule about sales tax deductions, if elected instead of state income tax, and what items can be added to the tables that IRS allows without collecting all receipts all year.  You can add the sales tax paid on a new motor vehicle, boat, airplane (I think), and construction materials for a new house.  Not construction materials for renovations to an existing house, or new appliances for any house.  

[BobKamman]

You can claim the actual amount from all your receipts all year, or the amount allowed by the IRS table for your state and locality.  But you can't add them together. 

[JanAtheCPA]

Actually, the IRS says this:

Generally, taxpayers may add to the table amount any sales taxes paid on:
• A motor vehicle, but only up to the amount of tax paid at the general sales tax rate;
and an aircraft, boat, home (including mobile or prefabricated), or substantial addition
to or major renovation of a home, if the tax rate is the same as the general sales tax
rate.

The instructions for Schedule A have more information about how to apply the sales tax rules properly. 

A $25,000 remodel certainly qualifies under the definition of substantial or major - but I have always been careful to tell clients that the sales tax on their new appliances (considered personal property as opposed to real property) are not included in the add-on.