A folder of home-improvement receipts may include both work that increases tax basis and ordinary maintenance. Sorting those categories before a sale helps the tax preparer establish the gain from the records.
Which work can increase basis
Work that added to the value of the house, prolonged its useful life, or adapted it to a new use raises your basis. Work that kept the house in good condition without doing any of those three does not.
Publication 523, Selling Your Home, states the test and then lists examples on both sides of it.
The test, in the publication's words
"Improvements add to the value of your home, prolong its useful life, or adapt it to new uses." Against that, the publication excludes from basis "any costs of repairs or maintenance that are necessary to keep your home in good condition" but "don't add to its value or prolong its life." Its own examples of that second category: "painting (interior or exterior), fixing leaks, filling holes or cracks, or replacing broken hardware."
What the publication counts, by category
These are the examples the publication itself gives of improvements that increase basis.
- Additions: bedroom, bathroom, deck, garage, porch, patio.
- Lawn and grounds: landscaping, driveway, walkway, fence, retaining wall, swimming pool.
- Systems: heating system, central air conditioning, furnace, duct work, central humidifier, central vacuum, air and water filtration systems, wiring, security system, lawn sprinkler system.
- Exterior: storm windows and doors, new roof, new siding, satellite dish.
- Insulation: attic, walls, floors, pipes and duct work.
- Plumbing: septic system, water heater, soft water system, filtration system.
- Interior: built-in appliances, kitchen modernization, flooring, wall-to-wall carpeting, fireplace.
Read the list and the pattern is plain. A new roof is on it. Fixing the leak in the old roof is not. A furnace is on it. A service call is not.
The rule that surprises people
An improvement that is no longer part of the house comes back out. The publication says costs of improvements that are no longer part of your home cannot be included in basis, and its own example is wall-to-wall carpeting you installed and later replaced. The carpet from 1998 is not in your basis if the carpet from 2014 covered it over.
Only the one that is still there counts.
There is a second provision that works the other way, and it rewards keeping good records of a big project: "You can include repair-type work if it is done as part of an extensive remodeling or restoration job." Patching the plaster on its own is maintenance. Patching the plaster inside a gut of the kitchen is part of the remodel.
Why a seller should care before the sale, not after
Basis is the number that gain is measured from, so every dollar of improvement you can document is a dollar the gain is not. For most sellers the exclusion covers the gain and none of this matters. For an owner who has been in the house for decades, in a house that has appreciated, it can matter quite a lot, and the records are what decide it.
In practice, keep the contract, the invoice and the proof of payment for anything structural, anything mechanical, and anything that changed the footprint or the layout. Keep them with the closing statement from when you bought, not in a drawer with the manuals. A receipt you cannot find is not a receipt.
The basis rules classify costs for tax purposes. They do not establish which improvement will recover its cost in a sale, so treat that as a separate property and market question.
What your basis is, which of your receipts qualify, and what the gain comes to belong to your CPA.
The notes on capital gains tax when you sell and on fixing it or pricing for it cover the two decisions this one sits between, and the sellers page sets out how a listing is prepared.
Source: IRS Publication 523, Selling Your Home, for use in preparing 2025 returns, the sections on determining basis, improvements and repairs, and the publication's own examples of improvements that increase basis. Read at source, October 9, 2026.
This note is general. It is not tax advice. Which of your own costs are included in basis depends on your records and your situation.