Your Home and the IRS

You may not have current plans or any intention of selling your home. Needless to say, unexpected lifestyle changes or job relocations can alter your plans. In the case of such an event in your life, are you prepared to prove to the IRS any capital improvements you’ve made on the home you intend to sell?As you probably know, the IRS won’t tax your profit on the sale of your house based on improvements you’ve made to it. But proof of the expense of such improvements is vital to this process! You must be able to provide proof of each and every expenditure. 

Bear in mind that it’s nothing personal, but the IRS won’t take your word for it. Even that obviously new bathroom in the second floor expansion won’t be proof enough. The brand new family room addition is obvious to the neighbors, but that won’t do it for the auditors. They’re going to want to see receipts. And they’ll want to see cancelled checks too.

 You’ll want to keep records that show the purchase price, closing costs, and any and all improvements you made to your property for as long as you owned it, and for another three years after the sale.

 Create a file with this information and staple receipts and cancelled checks together. It’s a good idea to also include the purchase of any new appliances, in case they would remain with the house. Perhaps you’ve filed some of them in the desk drawer but others are in the file cabinet. Pick up an accordion file at the office supply and, if you haven’t already, start collecting all the paperwork, receipts, and related information to make next year’s tax filing as painless as possible. Then, if it becomes necessary to sell your home, all of these items will be in one place.

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Brought to You By Your Favorite Realtor,
Nancy Hankin 
www.PalmSpringsHomesAndEstates.com