Save receipts for home improvements

Whenever you make improvements on your home, save the receipts.  These improvements may include additions and other improvements that have a useful life of more than 1 year. They can also include special assessments made for local improvements, and even amounts you spent to restore damaged property.

1890 Trube Castle

1890 Trube Castle by ניקולס, on Flickr

Improvements increase the “adjusted basis” of your home  Adjusted basis will sometimes reduce the taxable gain when you sell your property.

Improvements add to the value of your home, prolong its useful life, or adapt it to new uses. For example:

  • Additions
  • Bedroom
  • Bathroom
  • Deck
  • Garage
  • Porch
  • Patio Heating & Air Conditioning
  • Heating system
  • Central air conditioning
  • Furnace
  • Duct work
  • Central humidifier
  • Filtration system
  • Lawn & Grounds
  • Landscaping
  • Driveway
  • Walkway
  • Fence
  • Retaining wall
  • Sprinkler system
  • Swimming pool
  • Miscellaneous
  • Storm windows, doors
  • New roof
  • Central vacuum
  • Wiring upgrades
  • Satellite dish
  • Security system
  • Plumbing
  • Septic system
  • Water heater
  • Soft water system
  • Filtration system
  • Interior
  • Improvements
  • Built-in appliances
  • Kitchen modernization
  • Flooring
  • Wall-to-wall carpeting
  • Insulation
  • Attic
  • Walls
  • Floors
  • Pipes and duct work

Improvements no longer part of a home must be subtracted back out of the adjusted basis.

Most repairs, such as repainting or fixing leaks, cannot be added to the the basis of your property.  Repairs maintain your home in good condition but do not add to its value or prolong its life.  However, an extensive remodeling or restoration, which includes painting and other repairs, will increase the basis of your property.

Most taxpayers can exclude all, or most, of the gain on the sale of their homes.  Keeping accurate records of your improvements will help reduce any taxable gains when you are ready to sell your house.

For more information, go to the IRS website.

About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

4 Responses to “Save receipts for home improvements”

  1. Hi Mark,

    Do you know of a way of documenting the value of an improvement if the original receipts are not available? For example, a 40 yr/old home had a master bedroom added onto it about 20 years ago. Unfortunately, the original receipts are not around anymore. But it’s clear that the bedroom was added onto it. An appraiser recently noted its current value as $15k. Do you think there a way to document this improvement without the original receipt?

    Thanks!

  2. mark i thought home owners where exzempt from the first 250-500,000 worth of captiol gains ??

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