Cost basis for your house: How to track it?

[Brian Elfert]

I scan each receipt as I purchase the item and enter the amount onto a spreadsheet. The spreadsheet has tabs for various categories like plumbing, electrical, flooring etc mostly for my own curiosity. The summary page totals the tabs and contains the initial purchase price, so I always know the current costs of the home. The scanned receipts are in a big box in the attic should I ever need the paper copies.

Unfortunately, I never started doing this when I bought my house so I have hundreds of receipts to scan in. I should start on the project when I have bits of extra time. I scanned in all the receipts for my solar project to get my 30% credit.

[Bill Dufour]

I do not think hiring someone to run a dozer over the driveway every few years can be added to the cost basis. I would think adding one more bag of gravel with the exact same dozer work could be included in the cost basis. This is a total guess here.
For a mining claim paying for dozer work on the access road is all that is required to show continuing investment before any profits are made.( to keep a claim valid you must put work or money into it). There is no requirement for the claim to ever make a profit or even produce any sellable material.
Many people own mining claims that are just summer cabins on government land since the cabin is a nessacry office structure for the operation as is the garage and driveway.
Bill D

[Brian Elfert]

Routine maintenance cannot be added to the cost basis of a house. However, improvements can add to the cost basis. Paving a gravel/dirt driveway would be an improvement. I am not sure if tearing up a paved driveway and having it repaved would be an improvement or maintenance. I am thinking maintenance.

[Zachary Hoyt]

Would replacing old wooden single pane windows with modern windows be an improvement or maintenance? I doubt I'll ever come near the capital gains threshold, but I have receipts for all the things I bought to work on the house.

[Lisa Starr]

Zachary, My CPA says new windows are an improvement. Painting the old ones would be maintenance.

[Michael Drew]

Study up on a 1031 exchange if you plan to sell your home or second home or property. If you plan for it, and you do not "need" the cash/profit from the sale, you exchange up indefinitely - and not pay capitol gains tax until you finally cash out. It is time sensitive though, so make sure you know the rules before you play.

[Lee DeRaud]

Some states, like California, even have property tax issues. My old home in California had a grandfathered in basis on its property tax. If we had bought another house in the same county we could transfer the lower rate.

As of a couple of years ago, the 'same county' thing went away. But that whole deal applies only to seniors.

One gotcha is that actual changes made to a house will be assessed as of the time they're done and bump up the assessed value. So a bunch of money put into the house might help with capital gains tax when selling, but will cost more in property taxes in the meantime. I got dinged when I redid the back landscaping because the new patio cover was bigger than the one it replaced: the assessment increase was the cost of the new one divided by the percentage size increase.

[Brian Elfert]

It sounds like I need to keep all my receipts until I sell my house at some point in the distant future.

[Edwin Santos]

Study up on a 1031 exchange if you plan to sell your home or second home or property. If you plan for it, and you do not "need" the cash/profit from the sale, you exchange up indefinitely - and not pay capitol gains tax until you finally cash out. It is time sensitive though, so make sure you know the rules before you play.

Before going down this road, consult with a professional about whether a primary residence is eligible for 1031 exchange. In my opinion it is generally not. However, there are conditions under which you could convert the property into a rental/investment property at which point it would become eligible for a 1031 exchange.

Otherwise, in answer to the original question, start an Excel worksheet and enter in the receipts and all other costs that you can document. It may seem like a daunting task, but chip away at it, and you'll get there. Personally I'd scan the original receipts, but if you like you can just set them aside somewhere once they are recorded on your cost schedule. The only reason you would need them later would be if the IRS or state challenges your schedule of costs.

[Jim Koepke]

As of a couple of years ago, the 'same county' thing went away. But that whole deal applies only to seniors.

Thanks for the clarification Lee. I moved out of California almost 15 years ago so haven't kept up much with their laws.

Their Franchise Tax Board seems to have troubles keeping up with my tax filing. Much of my income is associated with California. Many years ago there was a case of someone who retired from California but moved to another state who didn't think they should pay income taxes to California. The case came out in their favor on retirement and trust incomes.

A few times in the last few years the California TFB has only sent a partial wired deposit refund on my taxes and then a few weeks to a month later sends me a check for the rest.

My tax preparer said it is likely all of the paper involved gets scattered before it all comes together.

jtk

[Lee DeRaud]

Their Franchise Tax Board seems to have troubles keeping up with my tax filing.

My favorite stunt of theirs was when I filed my deceased mom's last federal return from my own address. Apparently FTB gets confused when a federal return comes from California and there's no corresponding state return. Took me several months to convince them that, no, she did not live in California (or anywhere else at that point), and had never earned income here.

[Lee DeRaud]

My tax preparer said it is likely all of the paper involved gets scattered before it all comes together.

What is this "paper" you speak of?