Home Improvement Receipts: Scan Now, Save Indefinitely

housecostbasis2For many people, when they sell a home they don’t even consider taxes. But over time, especially if you live in a relatively expensive area, more and more people will bump up against the federal capital gains exclusions of $250,000 for individuals and $500,000 for couples. (You must have lived in the home for at least two out of the five years before the sale.)

This NY Times article projects that the following share of homeowners in certain high-cost cities will exceed the 250k/500k limits within the next 10 years, assuming just 3.5% annual growth and no further improvements. (Also consider the uncomfortable idea that you really can’t know if you’ll be single or married when it comes time to sell your home.)

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Most importantly, the article provides a good reminder to save all of your home-related receipts because they can raise your cost basis and thus reduce any potential capital gains. It’s so easy, and those little pieces of paper can literally be worth thousands of dollars down the road when the tax bill hits.

In general, you should save all of your home repair and remodeling receipts, although things considered maintenance won’t count (painting, fixing leaks, patching cracks, etc.). Here are a bunch of things taken from IRS Pub 523, Selling Your Home. Don’t take this as specific tax advice, but instead as a potential reminder in case you have done something on this list but don’t have the receipts properly stored away and archived.

Home Acquisition and Closing Costs.

  • Charges for installing utility services, legal fees for preparing the sales contract, title search fees, recording fees, survey fees, transfer or stamp taxes, and owner’s title insurance.

Home Improvements

  • Additions. Bedrooms, bathrooms, garages, decks, patios.
  • Exterior. New roof, siding, satellite dish, storm windows.
  • Interior. Built-in appliances, kitchen modernization, flooring, wall-to-wall carpeting, fireplace.
  • Lawns and grounds. New driveways, landscaping, fences, retaining walls, sprinkler system, swimming pools.
  • Systems. Heating, air conditioning, furnace, duct work, air/water filtration, security system.
  • Plumbing. Septic, water heater, water softener, water filtration.
  • Insulation. Attic, walls, floors, pipes, ductwork.

Physical receipts can get lost or fade over time, but the IRS accepts electronic records so it is quite easy to make a PDF using either your home scanner or just your smartphone. I use the well-reviewed Scanner Pro app and am impressed by its quality, but there are many competitors out there that I haven’t tried. You can then save to a cloud service like Dropbox or Evernote, or simply e-mail them to a searchable gmail account as another form of backup.

Howard Marks on Assuming Less Risk and Lowering Expectations

greatmindsObserver has an interesting profile of respected investor Howard Marks, excerpted from the book The Great Minds of Investing (found via Abnormal Returns).

I enjoy the writings of Howard Marks because his observations are logical and rational, and he doesn’t mind putting out stuff that is boring and hard to do. It is much more popular to write about exciting things that are easy to do like “sell all your bonds!” or “buy oil stocks now!”. This quote from the profile is a good example. (Bolding is mine.)

“You can’t control the environment,” Mr. Marks adds. So the key is to recognize how it’s changing, accept it, and respond as wisely as possible. “The screwiest thing you can do is to think you’re a Master of the Universe. We’re all just little cogs, and the universe will go on without us. We have to fit into it and adapt to it.” For example, at the time of our interview in late 2014, he sees scant investment opportunity and excessive complacency: “What bigger mistake could there be than to think you can safely get high returns in a low-return world?” Investors should adjust by assuming less risk and lowering their expectations. He cites a favorite quote from Peter Bernstein: “The market’s not a very accommodating machine; it won’t provide high returns just because you need them.”

Assume less risk. Lower your expectations. I’ve been reading a lot of Dr. Seuss recently, and I think he would say “you may yawn and boo, but that is what you should do.”

For some reason, this book is out-of-stock at Amazon, unavailable at my library, and third-party copies are $70?! I believe this is because it contains high-quality photographs of the people profiled. Not to worry, Oaktree Capital has all of Marks’ famous memos online for free, or you can read a distillation of them in his book The Most Important Thing Illuminated (my review).

TopCashBack: Shopping Portal That Promises Highest Payout

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Update: There is a limited-time offer for new customers that gets you $9.90 cash back from Wal-Mart when you buy a 138 fl oz bottle of Tide liquid laundry detergent for $8.97 with free in-store pickup. Ends 7/8/15. Visit Walmart through … [Read the rest]

Snagshout: Discounted Amazon Products In Exchange For Honest Reviews

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If you're like most Amazon shoppers, you don't like buying anything unless it has a lot of positive 4 and 5 star reviews. But that makes it really hard for new brands and products to gain traction. Good ole' capitalism has created a new breed of … [Read the rest]

Current Amex Special Offers: Target, Wal-Mart, BJ’s Warehouse, iTunes (Targeted)

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Updated 7/1/15. American Express cardholders can participate in "AmEx Offers" which offer discounts to various merchants. These promotions often offer the opportunity for easy savings without changing your spending habits. Sometimes I just buy a … [Read the rest]

Global Asset Allocation Book Review: Comparing 12+ Expert Model Portfolios

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I am a regular reader of Meb Faber's online writings, and volunteered to received a free review copy of his new book Global Asset Allocation: A Survey of the World's Top Asset Allocation Strategies. It is a rather short book and would probably be … [Read the rest]

My One-Page Financial Plan: Why Is Money Important To Me?

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I've already shared two nuggets from the book The One-Page Financial Plan by Carl Richards - the importance of getting started and the true value of a human advisor. But what about the title itself? Before even reading the book, I was impatient … [Read the rest]

5% Cash Back Credit Cards: Rotating Categories Update 2015

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3rd quarter activation for 2015 now open! The credit cards below offer a hefty 5% cash back on certain categories that rotate each quarter. It takes a little extra attention, but I also rack up over a hundred dollars in additional rewards per year … [Read the rest]

Why I Hold TIPS in My Portfolio (Treasury Inflation-Protected Securities)

EconompicData has a nice, relatively brief post about the relationship between US Treasury bonds, TIPS, and inflation. I would hold either Treasuries or TIPS (or both) because they have the highest credit quality available, and that is a big part … [Read the rest]

Best Frugal Chef’s Knife – America’s Test Kitchen (For 20 Years In a Row!)

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Update: ATK just sent me a new review that considered newer chef's knives that have come onto the market, and the same knife won again! They say it has now been on top for 20 straight years. You can see the methodology and full rankings here, but … [Read the rest]

Early Retirement Portfolio Income Update, Mid 2015

The closer I get to the reality of living off of my portfolio, the more I like the idea of living off dividend and interest income. However, you can't just buy stocks with the highest dividend yields and junk bonds with the highest interest rates … [Read the rest]

Early Retirement Portfolio Asset Allocation Update, Mid 2015

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Here's a mid-year update on my investment portfolio holdings for 2015. This includes tax-deferred accounts like 401(k)s and taxable brokerage holdings, but excludes things like physical property and cash reserves (emergency fund). The purpose of … [Read the rest]