In addition to being essential for deducting expenses on your tax return, keeping thorough and accurate homeowner records will help you calculate your house’s basis or adjusted basis.
If you purchased the property, these records would include your purchase contract and settlement paperwork; otherwise, if you received the property through a gift, an inheritance, or another comparable method, there would be additional concrete proof. Keep all receipts, check cancellation statements, and other documentation demonstrating any additions or enhancements to the basis.
The following are a few examples:
- Adding a room to your house
- Changing the entire roof
- putting in a driveway
- central air conditioning service
- Home wiring renovation
- Evaluations of possible local improvements
- Costs incurred to repair the destroyed property
In addition, you should keep track of any decreases to the base, such as:
- Insurance or other sources of payment for casualty losses
- An uninsured casualty loss with a deductible
- Easement or right-of-way payments
- Expenses for energy conservation measures are not included in income.
- Renting or running a business from a residence entitles the owner to depreciation deductions
As always, tax law is intricate; therefore, it is wise to consult a certified tax and accounting specialist. It is recommended that you consult a qualified CPA in Sanford, Florida, regarding any tax issues you may have.
The Things You Should Know
It’s up to you how to preserve your records, but they must be accurate and readable by the IRS. You must also maintain these documents for as long as federal tax law requires.
Until the statute of limitations for the return expires, keep the documentation that proves an item of income or a deduction that appears on a return. A statute of limitations is a deadline after which no legal action may be filed.
The statute of limitations for tax assessments is typically three years from the date you submitted the return. The time restriction for submitting a claim for a credit or refund is typically three years from the date you initially filed the lawsuit.
It’s possible that you’ll need to preserve the basis for the property’s records after the statute of limitations has passed. Calculating casualty losses, converting a property to a business, and giving a home as a gift are all affected by the basis. These documents should be kept for as long as necessary because they are crucial for determining the property’s basis.