ASK KIM
Repairs Don't Help at Tax Time
by Kimberly Lankford

Prior to putting our house on the market, we spent more than $9,000 on renovations and another $3,000 on repairs. Can we write off any of these expenses on our taxes?

No. The cost of repairs has no tax impact, and it's doubtful that what you spent on improvements does either. If part or all of your renovations qualify as improvements -- things that added to the house's value rather than simply maintained it in good shape -- you can add that amount to your tax basis. The higher your basis, the lower the profit on the sale.

But that only matters if your gain on the sale exceeds $250,000 (or $500,000 if you're married and file a joint return). That much profit is tax-free, assuming you owned and lived in the place for two of the five years leading up to the sale.

For more information about the tax rules for home sales and other tax tips, see our Homeowner's Tax Guide.

Who taxes my CD?

If I purchase a certificate of deposit from a bank out of state, is the interest taxed at my home-state rate?

The interest is taxed in your state, and the tax rate is generally the same for interest earned on CDs from local banks, says John Logan, senior state-tax analyst with CCH, a publishing firm that specializes in tax information.

There are a few exceptions. In Massachusetts, for example, individuals can exempt up to $100 of interest they receive from in-state bank from their state income taxes ($200 for married couples).

If your state offers a similar break, it might make sense to stay close to home, even if it means accepting a slightly lower rate. To find the best rates in your area, see our Yields and Rates page.