Blog

We keep you up to date on the latest tax changes and news in the industry.

Preserve Your Wealth: Essential Home Improvement Records for Tax Savings Before Selling

In today's dynamic real estate market, homeowners must strategically manage asset documentation to maximize tax savings. Whether you're contemplating a move, considering divorce in Texas, or planning for retirement, maintaining detailed home improvement records is crucial. These documents not only affect your tax liabilities but also ensure you're making informed financial decisions regarding your primary residence and investments like a condo purchase. Image 2

Under current tax regulations, homeowners can exclude up to $250,000 of gain from their income ($500,000 for married couples) upon selling their primary residence, provided they have lived there for 2 out of the last 5 years. This exclusion strategy is particularly vital for those managing unique financial portfolios, such as trusts, or converting SEP IRAs to Roth IRAs.

If your gain exceeds these thresholds, accurate home improvement records become indispensable. These records allow you to adjust your home's cost basis, effectively reducing taxable gain, and can be pivotal for those facing legal challenges, like the sale of a broker-dealer business.

Scenarios Necessitating Home Improvement Documentation

Consider these situations where home improvement records offer financial relief:

  • Long-term Ownership: Over time, inflation and property value appreciation may surpass exclusion limits.
  • Rental Conversion: Establish a depreciable basis when switching to rental status.
  • Second Home Arrangements: Future sales might not qualify for primary residence exclusions.
  • Casualty Loss Claims: Essential for repair documentation post-loss.
  • Non-qualification for Standard Exclusion: Applies to sales before meeting typical residency requirements.
  • Divorce Settlements: A reduced exclusion may apply, reflecting $250,000 for one spouse over $500,000 for couples.
  • Potential Tax Revisions: Maintain flexible planning for legislative changes impacting exclusion amounts. Image 3

Identifying Qualifying Home Improvements

Ensure meticulous tracking of qualifying enhancements, notably upgrades that increase home value—ranging from a remodeled kitchen to comprehensive landscaping. Conversely, remember that routine repairs or maintenance, such as painting or leak fixes, aren't included in your home's adjusted basis. Furthermore, improvements that earn credits or deductions, like solar installations or energy-efficient technologies, may have different tax implications.

For personalized advice on maximizing tax exclusions or for assistance related to your specific circumstances, such as preparing Bernette's trust taxes or navigating property decisions amidst marital changes, please feel free to contact our office. Let an informed approach to tax savings and investment security guide your financial journey.

Share this article...

Sign up for our newsletter.

Each month, we will send you a roundup of our latest blog content covering the tax and accounting tips & insights you need to know.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

We care about the protection of your data.

James T. Neilson We love to chat!
Please feel free to use our Ai chat assistant or use the contact button to contact us.
Please fill out the form and our team will get back to you shortly The form was sent successfully