Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

01/31/2008
How long should I keep receipts dealing with my rental property?
If you have a rental property and during the year you've shown it on your tax statements that you've made improvements, do you still hold onto those receipts for later on when you sell the house?
Rosemary Ervin, CPA:
expert info »
Always keep records of purchase and capital improvements to real estate. When you have a rental property, you keep a depreciation schedule. This schedule records your improvements annually and allows you to take a deduction for a part of the initial cost and improvements each year. When you dispose of the rental property, your basis (see #1) is adjusted for the expenses that you took each year. For example, you paid $100,000 for the property, $10,000 for improvements over the years, and were allowed $40,000 depreciation expense over the years you held it as a rental activity. Your basis is $100,000 + $10,000 - $40,000 = $80,000. If you sell it for $200,000, your gain is $120,000. Recall (see #2) if you never rented it, your gain would be zero: $200,000 - $110,000 less exclusion ($250,000 or $500,000) = zero
Gail Rosen, CPA:
expert info »
Yes still save the receipts. You depreciate the improvements on the rental house over 27.5 years so you do not get an immediate write off for it. And remember, you only get the exclusion of $250,000 ($500,000 [if married filing jointly]) if you lived there 2 of the last 5 years. If you sell a house you rented out during the time you owned it you will have recapture of
depreciation as well. Bottom line, save and keep track of all improvements on real estate you
own whether or not you live there and/or rent it out.
Jody Rorick, CPA:
expert info »
You should hold onto any proof of capital improvements, until you sell, then, for 7 years after that, to be safe, for tax purposes.