Capital Improvement
Every dollar spent, substantiated.
A capital improvement that is not substantiated is one that, at audit or at sale, did not happen. The Record is the audit-grade documentation chain — brand, model, vendor, invoice, install date, photo, condition — that turns spend into preserved basis, claimed exemption, and defensible position.
A $3M renovation properly classified as capital improvement carries roughly $266,000 of NY sales-tax exposure that NY State Tax Law §1115(a)(15) exempts — but only with Form ST-124 on file and the work correctly characterized. The same renovation, at sale, can reduce taxable gain by the full $3M against an adjusted basis under IRC §1016 — preserving roughly $1.04M of federal-plus-NY tax at the combined NY-resident rate. Both depend on the same thing: a documentation chain the IRS and NY DTF cannot dismiss.
Where most owners fail is not the renovation. It is the record of the renovation. Invoices in seven email accounts. Contractors out of business. ST-124 never executed. Scope-of-work language that does not distinguish capital from repair. When the sale comes, or the audit does, the owner is forced to accept the original purchase price as basis — and pays tax on improvements they actually made.
IDist captures the chain at the moment of installation, organized so your CPA, attorney, insurer, and qualified appraiser can stand behind it. The Record is the substantiation. What your professionals do with it — that is their job, not ours.
How IDist serves this.
NY ST-124 sales-tax exemption.
NY sales tax in NYC is 8.875% (4% state + 4.5% city + 0.375% MCTD). Capital improvements meeting the §1101(b)(9) test — substantially adds value, becomes part of the real property, intended permanent installation — are exempt when Form ST-124 is executed with each contractor. NY DTF audits look for the executed ST-124, scope-of-work language proving the capital-improvement test, invoice-level proof, and post-installation condition evidence. IDist captures all four for every line item.
NY Tax Law §1101(b)(9), §1115(a)(15) · NY DTF Pub. 862 · Form ST-124
Adjusted basis at sale (IRC §1016).
Every dollar of substantiated capital improvement adjusts basis upward. At combined federal (23.8% LTCG + NIIT) and NY-resident (10.9%) — roughly 34.7% — every $1M of documented improvement preserves about $347k of tax at sale. The IRS position when basis is undocumented: the improvement did not happen. The Record is the burden-of-proof package taxpayers are required to maintain under Treas. Reg. §1.1016-2.
IRC §1012, §1016(a)(1) · Treas. Reg. §1.1016-2 · IRS Pub. 523, Pub. 551
Federal bonus depreciation (where business use applies).
The One Big Beautiful Bill Act (2025) restored 100% bonus depreciation under IRC §168(k) for qualified property placed in service after January 19, 2025. A pure personal residence gets none of this. Where any portion is business-use — LLC trade-or-business, Schedule E rental, qualified home office, mixed-use townhouse — cost segregation studies commonly reclassify 15–25% of basis into 5/7/15-year property, producing year-one deductions in the six- to seven-figure range. The cost-seg engineer needs an engineered component identification chain; the dossier is that chain.
IRC §168(k), §168(e), §179, §280A · OBBBA §70301
Insurance reinstatement basis.
Adjacent to tax, load-bearing for loss recovery. Insurance carriers default to actual cash value (depreciated) at claim unless replacement-cost coverage is in force AND the insured can substantiate pre-loss condition + identity of installed assets. The same documentation chain that defends ST-124 and §1016 defends the full replacement-cost claim. The gap between ACV and full replacement on a $3M furnishings layer is commonly $1M+.
Insurance policy language · pre-loss substantiation
This is not tax advice. Your CPA, attorney, and qualified appraiser execute the position. IDist substantiates it — brand, model, vendor, invoice, install date, photo, and condition record — so the professionals on your side can stand behind the numbers.
you may also be
Quiet Sale
The substantiation built during capital improvement is what holds at sale. Every documented dollar is one not taxed under §1016.
Design
Origination at the maker is where ST-124 and the brand-model-vendor chain begin. Provenance and substantiation are the same artifact.
The Record
What IDist actually delivers: the audit-grade chain. One residence, documented to gold-standard, in twelve to fifteen weeks.
Begin with The Record.
One residence, documented to gold-standard. $7,500 foundation engagement, $500 deposit to reserve a slot. Cancel before the on-site visit if it is not the right time.
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