With the advent of the $250,000 ($500,000 if both a filer and spouse qualify) exclusion for home gains, many taxpayers don't feel the need to keep home improvement records. The expectation is the gain will never exceed the amount of the exclusion. However, failure to maintain records can be a costly mistake if:

1. The home is owned for a long period of time and the combination of appreciation in value due to inflation and improvements exceeds the exclusion amount.
   
   
2. The home is converted to a rental property and the cost and improvements of the home are needed to establish the depreciable basis of the property.
   
   
3. The home is converted to a second residence and the exclusion might not apply to the sale.
   
   
4. There are tax law changes that affect the exclusion of gain.

If you have any additional questions about how keeping home improvement records might directly affect you, please give me a call.