Oh, it is that time of year when we are all gathering our tax documents for the dreaded filing of the tax return. And if you are a freelancer like I am, trying to gather up your 1099s and remember where exactly you worked this past year, while simultaneously kicking yourself for not putting away money. Or maybe that is just me.

But what if you have sold a house this past year. This is especially important for those of us who have worked hard renovating and improving our houses. You are taxed on the sales price minus the “basis,” which includes the purchase price and improvements.

Enter the book Real Estate Tax Secrets of the Rich, which in spite of its unfortunate title would be a good place to start researching for any new homeowner, long before you ever reach the point of selling. According to the author, Sandy Botkin C.P.A., improvements to a house are added to the basis, while repairs are not.

So new things…like new windows, new floors, new doors are improvements. Refinishing floors, new doorknobs, new paint are all considered repairs.

Of course this book is only a guide you must consult a tax professional to determine your own tax liability. There is no such thing as tax secrets. People who are rich are not able to obtain any less tax liability than the average person. The difference is that people with money are more apt to spend it on getting the advice of a professional who can guide them in the right direction from the beginning.

And for the love of all things holy, save your receipts.

This entry was posted on Sunday, February 17th, 2008 at 8:41 pm and is filed under DIY. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.