Tag Archives: records

Organize Home Receipts Now For Big Bucks Later

plans

Don’t just save the plans after a remodel – save receipts too!

Sheila is 85 years old and has decided to downsize into a retirement community. Her house is worth a whole lot more than what she paid for it 60 years ago. Let’s say she paid $25K and is able to sell the house for $625K. That means she may have to pay taxes on as much as $600K profit – or gain (minus a $250K exclusion the IRS grants).

Sheila’s accountant tells her she could pay significantly less taxes because she can add the costs of various improvements she made over the years of ownership to the base amount she paid for the house. This is called increasing the cost basis of the home. But where is the documentation?

This is where being organized comes in handy. With a simple system, homeowners can preserve the records of improvements they have made to their property. When the house sells and the accountant is asking for ways to reduce your tax burden, the seller can produce the receipts and records which could save them thousands. Selling the family home and moving is stressful enough without adding last minute scramble to dig up old documentation.

The simplest system is a single file drawer or filing tub to hold all the purchase and improvement related documents. From there you can get more organized if you desire by separating different types of documents into different folders. If you’re planning a full remodel or major improvement it is helpful to keep all the permits, contracts, inspections, receipts and invoices together labeled by the name of the project.

Here is specific info from the IRS’s publication, Pub 523 – Selling Your Home, which outlines what qualifies as a cost basis improvement

Improvements

These add to the value of your home, prolong its useful life, or adapt it to new uses. You add the cost of additions and improvements to the basis of your property.

The following chart lists some examples of improvements.

home improvements chart

Repairs done as part of larger project.   You can include repair-type work if it is done as part of an extensive remodeling or restoration job. For example, replacing broken windowpanes is a repair, but replacing the same window as part of a project of replacing all the windows in your home counts as an improvement.

Examples of improvements you CANNOT include in your basis.

  • Any costs of repairs or maintenance that are necessary to keeping your home in good condition but do not add to its value or prolong its life. Examples include painting (interior or exterior), fixing leaks, filling holes or cracks, or replacing broken hardware.
  • Any costs of any improvements that are no longer part of your home (for example, wall-to-wall carpeting that you installed but later replaced).
  • Any costs of any improvements whose life expectancy, when installed, was less than 1 year.

Exception.   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition.

Obviously everyone’s tax situation is unique and there are other variables that can affect the picture, even year-to-year. We are simplifying for the point of illustration.

So no matter when you bought your home, now is the time to gather up all the house related receipts and start keeping any original improvement receipts. If you neglected to keep them, at least make a list of known improvements and try to estimate what you spent.

Did you find this article helpful? Let us know!

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Filed under Decluttering, Moving, Paper, Seniors, Strategies, Technology

Overwhelmed with Paper?

Check out our YouTube video!

Check out our YouTube video!

The start of a new year is the perfect time to set up a new way to handle the constant flow of incoming paper. If you often feel frustrated or overwhelmed with paper and wonder where to put things, you aren’t alone!

For years now we’ve been using FreedomFiler® with clients. We love this system because it really teaches clients what they  need to keep and for how long.

The beauty of the FreedomFiler® system is that it does the work of making these decisions for you. It is designed to cycle papers OUT of the files – forever eliminating the need to set aside time to “purge the filing cabinet”.

FreedomFiler® is made up of 4 color-coded sections:

  • GREEN for monthly miscellaneous transactions
  • BLUE for tax-related transactions
  • RED for permanent family and property records
  • ORANGE/YELLOW for current policies, agreements
  • You may set up an optional fifth section in PURPLE, for saving literature, articles, and notes

When filing papers with FreedomFiler®, you only have to figure out what kind of paper you are holding; that determines which color group it gets filed in and the color group will determine how long it’s kept.

To use the system ask 4 simple questions

  1. Does this paper require immediate action or follow-up?
  2. Can I use this paper for taxes?
  3. Is this a vital record belonging to a person or an asset?
  4. Is this a newer version of an existing document?

Click the graphic below to see how it works:

Freedom Filer makes filing easy

Could it be that easy?  YES! Check out our short video intro to give you a taste.

If you use FreedomFiler® share your experience.  If you have a question, share that too!

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Filed under General Organizing, Office, Paper, Work

Paper: to Keep or Toss? Problem Solved

Using Freedom Filer® takes the guesswork out of paper filing

Your Filing is Finished!

“What do I need to keep and how long should I keep it?”

This is one of the most asked questions we get from clients around their papers.

For years now we’ve been using FreedomFiler® with clients. We love this system because it really teaches clients exactly that – what do you need to keep and for how long?

The beauty of the FreedomFiler® system is that it does the work of making these decisions for you. It is designed to cycle papers OUT of the files – forever eliminating the need to set aside time to “purge the filing cabinet”.

FreedomFiler® is made up of 4 color-coded sections:

  • GREEN for monthly miscellaneous transactions
  • BLUE for tax-related transactions
  • RED for permanent family and property records
  • ORANGE/YELLOW for current policies, agreements
  • You may set up an optional fifth section in PURPLE, for saving literature, articles, and notes

When filing papers with FreedomFiler®, you only have to figure out what kind of paper you are holding; that determines which color group it gets filed in and the color group will determine how long it’s kept.

To use the system ask 4 simple questions

  1. Does this paper require immediate action or follow-up?
  2. Can I use this paper for taxes?
  3. Is this a vital record belonging to a person or an asset?
  4. Is this a newer version of an existing document?

Click the graphic below to see how it works:

Freedom Filer makes filing easy

Could it be that easy?  YES!

If you use FreedomFiler® share your experience.  If you have a question, share that too!

6 Comments

Filed under General Organizing, Office, Paper, Work