The housing market is beginning to turn around in Nevada over the last couple years. Data provided by Trulia.com indicates that twice as many home sales occurred in 2015 when compared to the bottom of the market in 2009. Many home owners who either lost, or liquidated, their homes over the past several years are finally in a stable financial position to get back into the market.
Many of the homes that are being purchased during this period of growth are those that have either been left vacant for years, require some refurbishing, or need massive upgrades and overhauls to qualify for lending, or to even be livable! Even new homes require additional capital influx in order to complete the front or backyard landscaping.
When we purchase a house, many of us use this required influx of capital to negotiate down the current selling price. But how many of us keep track how much actual additional capital we put back into the house after the sale has been completed? Improvements and substantial repairs such as landscaping, a new roof, fencing, etc., should be accounted for and included in your basis (capital costs) of your home. Keeping track of and having the appropriate record keeping of, these improvements can save you thousands of dollars in capital gains, and possibly net investment income tax, when you decide to sell the home in the future. Even if you decide that renting the home is a better course of action, having an accurate recordkeeping of the basis will allow you to depreciate the maximum allowable amount in order to reduce the rental income created from the business use of the property.
Keeping track of your basis in real property is an important part of homeownership that many of us forget about until it is time to sell. Twenty years from now, will you remember how much you paid the landscaper to put in a sprinkler system? Probably not. So help your future self out of a headache, and probably save a couple bucks, and keep track of those expenditures that you put into your new home. And after you are done, sit down on that new patio with a cold drink and relax, you’ve earned it.