A Simple Habit That Could Save You Thousands
A longtime client, Tricia, recently reached out after a conversation with a friend and shared an important retirement planning tip she felt more people should be aware of. We share it with you here.
As many of us settle into what may be our “forever home,” it’s easy to overlook an important financial detail: keeping records of home improvements.
Whether it’s new flooring, updated bathrooms, or a remodeled outdoor space, these upgrades don’t just enhance your home—they can also reduce potential capital gains taxes when you sell.
Many homeowners assume they’ll always “trade up” to another house. But as life evolves, some may choose to sell and downsize, rent, or move into a care facility. In those cases, minimizing taxable gains becomes much more important.
Currently, homeowners may exclude up to $500,000 in gains if married filing jointly, or $250,000 if single. However, long-term homeowners—especially single filers—can exceed those thresholds more easily than expected. That’s where documented improvements can help increase your cost basis and reduce taxable gain.
We’ve seen situations where homeowners made extensive upgrades but didn’t keep records—missing out on valuable tax savings.
A few additional considerations:
• Special rules may apply for surviving spouses (including eligibility for the full $500,000 exclusion if the home is sold within two years of a spouse’s death).
• Certain life events, including health-related moves, may qualify for exceptions.
• Timing matters—if you own multiple homes, selling before changing your primary residence could preserve eligibility for the capital gains exclusion.
As always, tax laws can change, so it’s important to review current IRS guidance (such as Publication 523) and consult a tax professional when the time comes.
Bottom line: Keep a simple file of receipts and records for home improvements—you’ll be glad you did.
Thank you to Tricia for sharing this insight—sometimes the most valuable planning ideas come from real-life conversations. If you ever come across something worth sharing, we always appreciate hearing from you.
