Recordkeeping for Individuals - Personal Residence Tips

You may be aware that most homeowners are able to exclude up to $250,000 of the gain realized on the sale of a principal residence. Married couples filing jointly may exclude up to $500,000. Homeowners need to keep very good records of expenses in the event that their gain is greater than the exclusion amounts.

The kinds of expenses we're talking about increase the tax basis of your home and therefore decrease taxable gain. They fall into two basic categories: those incurred at the time you buy your home and those made for improvements that materially add to your home's value or prolong its life. Just making the expenditures is not enough. You must keep receipts, canceled checks, or other proof.