RepairRadar guide
How to track home repair costs for taxes and resale
By J&H Technology · Updated
The short answer
Record every repair and improvement with the date, a description, the cost, who did the work and the receipt. Keep improvements separate from repairs: for a main home, the IRS adds the cost of improvements to your basis, which can reduce taxable gain when you sell, while ordinary repairs usually are not added. For a rental, repairs are generally deductible in the year you pay for them and improvements are depreciated. Keep the records until the IRS period of limitations expires for the year you sell the home.
Key points
- Record date, description, cost, contractor and receipt for every job.
- Tag each cost as a repair or an improvement.
- Improvements to a main home add to its basis; ordinary repairs usually don't.
- Keep property records until the limitations period ends for the year you sell.
What to record for every job
- The date the work was done (and the date paid, if different).
- What was done and where in the house.
- The total cost, split into materials and labor if you have it.
- Who did it: the contractor's name, license number if relevant, and contact details.
- The receipt or invoice, and before-and-after photos.
- Any warranty that came with the work or the product.
Repairs and improvements are not the same
The IRS treats repairs and improvements differently. An improvement adds to the value of your home, prolongs its useful life or adapts it to new uses: a new roof, an addition, central air, new windows or a remodeled kitchen. A repair keeps the home in good condition without adding value or prolonging its life: fixing a leak, patching drywall or replacing a broken window pane.
For your main home, IRS Publication 523 explains that the cost of improvements is added to your basis. A higher basis means a smaller gain when you sell. Repairs are generally not added, unless they are done as part of a larger improvement project.
When you sell your main home, you may be able to exclude up to $250,000 of gain ($500,000 for a married couple filing jointly) if you meet the ownership and use tests. Improvement records matter most when the gain could be larger than that, or when you don't qualify for the full exclusion.
If the home is a rental
For rental property, IRS Publication 527 says you can generally deduct the cost of repairs in the year you pay for them, but you can't deduct the cost of improvements; you recover them through depreciation instead. That makes the repair-or-improvement label on each cost even more important.
How long to keep the records
The IRS says to keep records relating to property until the period of limitations expires for the year in which you dispose of the property. For a home, that means keeping improvement records for as long as you own it, and for a few years after you sell. See How long should I keep records? on IRS.gov.
Why it helps when you sell
Buyers and their inspectors ask how old the roof, the HVAC system and the water heater are. A dated history with receipts answers those questions quickly, shows the house was looked after, and helps you back up the asking price. It also helps you fill in seller disclosure forms accurately.
A note on tax advice
This guide explains general rules from IRS publications and is not tax advice. Tax rules change and your situation may differ, so check with a tax professional before you rely on a specific treatment.