One man’s junk is another man’s treasure. And by “other man,” we mean YOU down the road, or the future homebuyer of your current home! It’s important to collect and save the transaction receipts for all of the repairs and renovation projects that you have throughout the ownership of your home and here’s why:
Eventually, when one goes to sell a home, there’s a legal document that they must fill out called the “Residential Property Disclosure” (otherwise known as an RPD). This document provides potential homebuyers with what we would describe as a history of the home. It shares things like whether or not there has been any water damage in the home. It records information from issues like termite damage to mold.
Having receipts for the repairs you have made on your home will provide potential homebuyers with the evidence they want regarding when and how issues have been professionally resolved. This puts homebuyers at ease to know that you’ve taken proper care of the home while it was under your care. It also allows homebuyers to see which contractors provided the work, so that they can easily reach out if an existing issue arises later on.
When it comes to renovations – Besides giving yourself a valuable record and being able to prove to homebuyers what recent updates you’ve made to a home, knowing the total cost of your home-improvement projects could save you money when selling your home, thanks to a certain tax rule. The tax rule allows you to add capital improvements to the cost basis of your home. For example, if you purchased your home for $200,000 and recorded $50,000 worth of capital improvements over the years, the cost basis of your home is $250,000. If you sell your home for $500,000, you have a capital gain of $250,000. And that’s when that tax rule comes into play.
It’s important to note that the rule applies only to capital improvements. By definition, a capital improvement increases your home’s value, whereas a non-eligible repair returns something to its original condition. To learn more about which home renovation projects are actually capital improvements, reach out to an expert agent at the Ryan Reynolds Team today.
Regardless of whether you’re selling your home in the near future, we recommend finding a safe and secure place in your home to file away the receipts/invoices for home repairs and renovation projects. Remember, what may seem like junk to you now, could be a treasure later.