Recordkeeping for home basis
I have been toting around a binder the last couple of days, getting strange looks at work (OK, stranger than normal). It is my ‘home’ binder with lots of info on the financial aspects of our house. I haven’t seen anyone else post on this so I thought I’d share what I do in case it can help others.
The first sections of the binder are the ones having to do with our mortgage and home equity line-of-credit. All paperwork goes here, along with a summary of what happened when and for what amounts. I’m constantly surprised at the number of times our mortgage is sold to another company.
The main section I wanted to focus on is the one called “Basis.” In this section I copy all the invoices having to do with home improvements (as opposed to maintenance). An improvement for tax purposes is something that improves or enhances the value of the home. This even includes some of the closing costs when buying your house. The IRS has a good publication called Selling Your Home that lays out what constitutes an addition to basis.
The main reason I do this as we incur the expenses is that I tend to forget what we have done over time, or even if I remember I doubt I could find the appropriate documentation years later. Many of the items I have in this section aren’t large, but they add up quickly. Some examples: I marked up the closing statement on the house, detailing which items were deducted the year we bought the house, which items are amortized over the life of the loan, and which items can be added to the basis of the house. Another item: we converted the closet under the stairs into a pantry, so all the costs associated with the shelving I bought are here.
I started compiling a similar binder years ago with my first house because of the way the tax laws were structured then. Even with recent changes which provide a considerable exclusion ($250K for single, $500K for married filing jointly), such recordkeeping will come in handy if you own your home a long time and see it appreciate significantly. We are planning on owning our house another 5 – 7 years and I’m not going to bet on those exclusions being indexed, or that the tax law even provides this exclusion years from now. I don’t want to pay taxes on anything I don’t have to!
Other sections of the binder contain warranties on the major appliances, insurance coverage, and miscellaneous home sale info for the area. This is just the system I’ve developed over the years, but it has worked well so far. The reason I’m toting the binder around now is to make sure I’ve included all pertinent information for this year’s tax return.
Again, I hope this helps anyone who doesn’t keep up with their home improvements. Feel free to comment here on any system you use—I’m always looking for ways to make this easier.
The first sections of the binder are the ones having to do with our mortgage and home equity line-of-credit. All paperwork goes here, along with a summary of what happened when and for what amounts. I’m constantly surprised at the number of times our mortgage is sold to another company.
The main section I wanted to focus on is the one called “Basis.” In this section I copy all the invoices having to do with home improvements (as opposed to maintenance). An improvement for tax purposes is something that improves or enhances the value of the home. This even includes some of the closing costs when buying your house. The IRS has a good publication called Selling Your Home that lays out what constitutes an addition to basis.
The main reason I do this as we incur the expenses is that I tend to forget what we have done over time, or even if I remember I doubt I could find the appropriate documentation years later. Many of the items I have in this section aren’t large, but they add up quickly. Some examples: I marked up the closing statement on the house, detailing which items were deducted the year we bought the house, which items are amortized over the life of the loan, and which items can be added to the basis of the house. Another item: we converted the closet under the stairs into a pantry, so all the costs associated with the shelving I bought are here.
I started compiling a similar binder years ago with my first house because of the way the tax laws were structured then. Even with recent changes which provide a considerable exclusion ($250K for single, $500K for married filing jointly), such recordkeeping will come in handy if you own your home a long time and see it appreciate significantly. We are planning on owning our house another 5 – 7 years and I’m not going to bet on those exclusions being indexed, or that the tax law even provides this exclusion years from now. I don’t want to pay taxes on anything I don’t have to!
Other sections of the binder contain warranties on the major appliances, insurance coverage, and miscellaneous home sale info for the area. This is just the system I’ve developed over the years, but it has worked well so far. The reason I’m toting the binder around now is to make sure I’ve included all pertinent information for this year’s tax return.
Again, I hope this helps anyone who doesn’t keep up with their home improvements. Feel free to comment here on any system you use—I’m always looking for ways to make this easier.
posted by Dwight at
4:24 PM
2 Comments:
Sounds like a good system. We have files for all this stuff, but it's not as clearly annotated as yours sounds like it is.
My mortgage hasn't been sold yet. It will be two years in May since I got it. My mortgage company is supposed to have online access for mortgage accounts by the end of the summer. Just watch, the second I can add an online view of my loan to my Yodlee interface, they'll sell my mortgage to somebody else.
By
Tiredbuthappy, at 5:04 PM
I love these idea. I have been meaning to start something similar expecially since I started renting my house out.
By
2million, at 5:36 AM
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