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Every year millions of people buy or sell homes in the US. It’s a rite of passage to purchase a home. Whether you are moving from an apartment, your parent’s basement or an existing home there is one important thing the tax man wants to know when you sell your home, what is the tax basis value of your home? Why should you care about this if you are buying a home? That’s easy, when it comes time to sell your home you can minimize the tax basis and pocket more of your own money.
What is this and why does the IRS care? The tax basis value of your home is determined by taking the purchase price plus any costs of improvements or minus any reductions. The rules are outlined on the IRS.gov site, we have included a link to an FAQ here for more information. Basically, the tax basis of your property is determined by taking the price you paid for the property plus any improvements or upgrades you did to the property. If you use part of the property for rental purposes then portions of this income may need to be deducted from the cost basis. If you had a property sale last year check with your tax advisor on how to fully calculate the basis.
With the average length of time homeowners stay in a home just shy of 6 years it can be difficult come tax time to remember all the home improvements you made to your home. For example, if you added a bedroom to the basement when you moved into your home keeping track of those expenses related to the addition may be hard to find 6 years later. If you’re like me I can’t remember what I had for lunch yesterday and I certainly will not remember how much I spent on a home renovation that happened six years ago. You may find the payment to the general contractor but what if you paid the framers, drywall finishers and painters in cash? Do you have a record of that? Probably not, and without remembering those amounts or expenses you potentially lost adding $2,000 to $3,000 worth of improvement expenses to the tax basis. Now rather than saving on taxes you just threw that deduction out the window. In addition, what if you are making improvements today that 3 years from now when tax laws change turn out to be eligible for factoring into cost basis. With the tools provided by Home Renovation Hub you could easily pull up all the expenses along with notes on how you paid, who you paid, and materials bought years later. All your home projects and renovations can be tracked from start to finish using our tools.
If you are thinking about a home renovation project you can use our tools from planning to completion.
Planning your home renovation should be easy, organized and available 24/7. We have the tools you never knew you needed but you will thank us 100 times over come tax time when you sell your home.
The goal of creating HomeRenovationHub.com is to give homeowners tools they can use in real world renovations to help manage their project budgets, keep home improvements on course, and to track investments that build equity in your home. Since we use the tool extensively for our own personal remodels we are constantly tweaking and updating features to make it the most useful tool available to the DIY homeowner. If you are going through a remodel we would love for you to give us a try. In addition, we want your feedback as we build a collection of tools to help home renovators.