If you’re like us, there’s no small amount of grumbling at tax time when we realize there were so many receipts and documents we should have saved…but didn’t.
Now is the time to resolve to avoid that problem for this year’s taxes!
Among important paperwork to save is documentation of any improvements you make to your home. This can help offset any taxable gains you reap when it comes time to sell your home.
Current law allows homeowners (with a few exceptions) to exclude $250,000 gain from the sale of a primary residence for an individual and $500,000 gain for a couple. You can also reduce your taxes by subtracting selling expenses and certain home improvements made throughout the years.
“Since you are subject to federal capital gains taxes, state taxes (where applicable) and the 3.8% Medicare surtax,” notes Merriman investment advisory firm, “… keeping track of your improvement history can lead to significant savings on your taxes.”
According to Merriman, the following improvements can lower your tax liability:
Adding insulation, including pipes and duct work and insulation in attics, walls and floors.
Exterior improvements, including storm windows, doors, new roofs, new siding, satellite dishes.
Additions to the home, such as added bedrooms, bathrooms, decks, porches, patios and garages.
Improvement to the property, including fences, driveways, walkways, landscaping, retaining walls, swimming pools and lawn sprinkler systems.
Updating systems, such as heating systems, central air conditioning, a central humidifier, security systems, and air/water filtration systems.
Interior improvements, including built-in appliances, fireplaces, flooring, wall-to-wall-carpeting, and updating kitchens.
Be sure to save copies of receipts, canceled checks and other documentation and to check with your personal financial advisor for information on your specific situation.