Keep those renovation receipts

The dock, the deck, the roof — whether you do it yourself or hire a professional, keep the receipts. They could mean big tax savings.

Most people will face a capital gain if their property’s value increases from the time they bought it. If the principal residence exemption is not available, the capital gain will become taxable when the property is sold or transferred, including when the owner dies.

The gain may be calculated as the difference between the sale price and the asset’s “adjusted cost base” (ACB). This is where those renovation receipts come in handy.

The ACB is the original cost plus any capital improvements. Ultimately, they will reduce your taxable gain when the property is sold or transferred. But you’ll need receipts to document those expenses. Consider the example below.

	No receipts	With receipts
Proceeds of sale	$150,000	$150,000
Less original cost	-50,000	-50,000
Less capital improvements		-10,000
Gain on sale	$100,000	$90,000
Taxable gain (after Oct. 7, 2000)	$50,000	$45,000
Tax due (at 40% marginal rate)	$20,000	$18,000