Should You Be Saving Those Home Improvement Receipts?

A few weeks ago, I discovered a hardware store receipt among some papers my in-laws had given us. Because my father-in-law works in maintenance, I called them to see if he needed the receipt for reimbursement from his job. No, my mother-in-law told me, it wasn’t a work expense; it was the receipt for their new garage door. “But save it, anyway,” she said. “We’re keeping receipts so that when we’re gone and our kids have to sell the house, they can deduct home improvement expenses.” She added that she was a bit concerned, however, about some of the receipts from 1979 and 1980, as they were beginning to fade.

I have done our family’s taxes

...

[Continue Reading at SavingAdvice.com]

This entry was posted in Housing, Taxes. Bookmark the permalink.

6 Responses to Should You Be Saving Those Home Improvement Receipts?

  1. Karen says:

    I’m just curious, does the IRS require paper receipts, or would scans (saved on your computer) be acceptable? How about entries in a spreadsheet or a program like Quicken? It doesn’t really apply to me yet, since I don’t own a home, but just wondering.

  2. Stein says:

    I don’t know that this advice is sound. Using his example, if you make $50k on your house, you don’t pay a penny of taxes as long as you have lived there 2 of the last 5 years (250k is exempt for singles and 500k for married couples). If you are going to make more than that on your house, it may make some sense to track the larger things.

    If you inherit property, your basis is the fair market value at the time of transfer, regardless of what was paid or improved, and unless you are inheriting a huge estate, you won’t pay taxes on that either.

  3. Mike D. says:

    Stein is correct,if you have lived there at least 2 years you are wasting your time tracking expenses.

  4. Morfydd says:

    One other reason to keep your receipts is that for states that allow you to deduct sales tax in lieu of state income tax, it is calculated as either:

    –As found on all receipts for the year

    OR

    –A generic number based on your AGI, PLUS tax paid on new vehicles PLUS tax paid on home improvement materials. (No labor costs allowed.)

    In the second case (which almost everyone who itemizes in Washington State chooses), it’s worth a few bucks to save even small home improvement receipts.

  5. Garran says:

    In your scenario there would be no tax on the sale of your house, provided it is your principal residence.
    You receive a principal residence sale exclusion of $250,000 ($125,000 if single), therefore your taxes would be computed ONLY on the profit in excess of the exclusion.

    You are correct in which any improvements will add to the basis of the property.
    If the property is owned jointly by husband and wife, upon the death of either party the survivor can elect for a Step-Up Basis Valuation adjustment to bring their interest up to market value.

  6. Garran says:

    In your scenario there would be no tax on the sale of your house, provided it is your principal residence.
    You receive a principal residence sale exclusion of $500,000 ($250,000 if single), therefore your taxes would be computed ONLY on the profit in excess of the exclusion.

    You are correct in which any improvements will add to the basis of the property.
    If the property is owned jointly by husband and wife, upon the death of either party the survivor can elect for a Step-Up Basis Valuation adjustment to bring their interest up to market value.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>