contributed by Nathan Gehring
Today we are rolling out a new feature on the KeatsConnelly Cross-Border Blog. In addition to our regular Cross-Border Weekly Best of the Web post every Friday, we are going to begin posting a monthly “Planning Tip” on the final Wednesday of every month.
For our first monthly planning tip, we begin with something very simple yet critical:
Monthly planning tip: Keep all invoices and receipts for improvements made to property you own for as long as you own it.
If you own a home, second home or other real estate; make sure to keep all receipts and invoices for improvements made to the property for as long as you own that property. Someday you may sell or transfer the property. At that time, you will have to determine your tax basis in the property in order to calculate the amount of tax due. You should have documentation available to justify all claims for increases to your basis.
I recently worked with a client who did a magnificent job of this. The client was in the process of transferring a property held for many years. It clearly took great effort to identify and locate all these invoices, but the results were tremendously lowered tax due than would have been otherwise possible.
Maintaining records of all improvements may be a bit of a hassle, but can pay off greatly in the future.