One Easy Way to Avoid a Big Homeowner Tax
Home improvement receipts will help you when it comes time to sell your home.
If you're a homeowner who has seen the value of your abode rising, good for you! However, be prepared for what likely lurks behind that increase—an equally escalating tax hit. The good news is that there's a way to combat that tax, and all that's required of you is some good organization skills.
According to The New York Times, in places where home values have steadily increased—like Boston and San Diego—homeowners could have to pay hefty taxes on those gains if they decide to sell. Single homeowners who have seen a jump of $250,000 in the value of their home, and married homeowners who have enjoyed a $500,000 jump in the value of their home could end up paying a 23 percent federal tax on those gains. The Times reports that about four percent of single homeowners are in this tax zone and about one percent of married homeowners are in the zone.
Now that we've scared you half to death, relax. The simple solution to decreasing this tax hit is saving home improvement receipts. Any improvements or additions count against those gains. “Improvement” is the key word here. Repairs—like painting or refinishing wood floors—don't count. To find out what does count toward the tax liability, head to the IRS’ site. After that, start photographing those receipts, because paper doesn't last forever and is easily lost.
This article was originally written by Chris O'Shea for SavvyMoney®.