I was curious about the industry we are working in and its importance to the American Economy. It’s safe to say we are in an important industry sector if you didn’t know already. Check this: https://www.google.com/search?q=show+the+pie+chart+of+the+us+economy+sectors&client=safari&hs=Fijq&sca_esv=46ee9a34cc4453a3&hl=en-us&sxsrf=APpeQntsG1xF9fJCJN0R-8LnufCZO-UCiQ:1790891883793&udm=50&fbs=ABfTbFVyMZGZf1hfvX9uKjN_-G8c4u0nXx4bEIpwm1lnNH832QGGMdFXpDyzkQgEdtB8w9w-GD6PIjvNPpUnrx3WoOVIqtB7m0uJCnmO69VZCGvjkJswfxpqShzBmeU9vLtlIzpB5qp_I4BbqEr0GaxOvSmJRMiPBfI_gOTpSx7ZgMkeO1phpkSiUAU_pV29X-bP6EvXCNjLxiIQT15MSrAP6nH17FvH7cq8hOzZzSAyHBwOEb8jpqw&vsint=&aep=1&ntc=1&cs=0&sa=X&ved=2ahUKEwi8hcCU6JmXAxWJDzQIHYEMJU4Q2J8OegQIDxAE&biw=390&bih=699&dpr=3&iga=1&utm_campaign=safari_share_1

DO YOU TRACK THE BASIS IN YOUR HOME? Comment below and let us know how you do it. When you sell your home, the tax on your gain depends on your basis, which is what you paid for the home plus the cost of improvements. But improvements count only if you can prove them. Basis Matters More Every Year The home sale exclusion of $250,000 ($500,000 for married couples) was set in 1997 and has never been adjusted for inflation, while home prices have roughly quadrupled since then. Many long-time homeowners now face a taxable gain when they sell. In one court case, a couple claimed $286,070 in improvements but could not prove them. The court allowed $82,039, leaving the couple with tax on $101,907 of gain plus the cost of going to court. What Counts You add to basis any improvements that add value, extend the home’s life, or adapt the home to new uses, such as a new roof or a kitchen remodel. Repairs do not count, and neither do improvements you later removed or replaced. Depreciation, deducted casualty losses, insurance reimbursements, and energy credits reduce your basis. Records to Keep - The contract or proposal - The final invoice - Proof of payment (Download check images, since banks often purge them after about seven years.) - A few dated photos (As newspaper legend Arthur Brisbane said, “Use a picture. It’s worth a thousand words.”) Scanned records in an organized electronic folder are fine. Keep them as long as you own the home, plus at least three years after the year of sale.

THAT MEANS LOSSES CAN OFFSET PASSIVE INCOME......MAYBE If you own rental real estate, you may have passive losses that have been suspended for years. Although you cannot currently deduct these losses, they are not lost forever. With proper planning, you may be able to unlock them and use them to reduce your taxes. One common way to free suspended passive losses is to sell your entire interest in a rental activity. Once released, these losses can offset other income, potentially producing significant tax savings. But not every sale works. Selling a rental property to a family member or to a corporation controlled by you or your family generally does not release suspended losses. Likewise, giving the property away can permanently reduce the tax benefit of those losses. Another important planning consideration for 2026 is the excess business loss limitation. Even if you free a large amount of suspended losses through a sale, the law may limit how much you can deduct in the current year, with the remainder carried forward to future years. Because the tax consequences depend on how your properties are grouped, who buys them, and the timing of the sale, advance planning is essential.

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The IRS allows you to write off the old roof or component when you replace it on your rental property. The write-off of the old component creates three major tax benefits for you: - Immediate ordinary loss write-off. You can claim an immediate deduction for the loss, provided the passive loss rules do not delay it. - Conversion to capital gain. You convert otherwise unrecaptured Section 1250 gain to capital gain. - Time value of money. Investing the tax savings from the write-off can generate additional revenue over time. Example Consider a building purchased for $4 million seven years ago. You replace the roof and other components. The replacements create a $660,000 ordinary loss. If you’re in the 40 percent tax bracket, your immediate cash savings by claiming the deduction is $264,000. If the passive loss rules delay your deduction until you sell the building, the $660,000 deduction remains available and continues as an ordinary loss at the time of sale. Time Value of Money Investing the $264,000 savings at 5 percent after taxes can significantly increase your earnings over time. For example, in 30 years, this grows to $1,086,660. Additional Savings upon Sale When you sell this building, the partial disposition election to write off the replacements helps you avoid the 25 percent tax on unrecaptured Section 1250 gain for the disposed assets. This results in additional tax savings at the time of sale. The IRS allows you to write off the old roof or component when you replace it on your rental property. The write-off of the old component creates three major tax benefits for you: - Immediate ordinary loss write-off. You can claim an immediate deduction for the loss, provided the passive loss rules do not delay it. - Conversion to capital gain. You convert otherwise unrecaptured Section 1250 gain to capital gain. - Time value of money. Investing the tax savings from the write-off can generate additional revenue over time. Example Consider a building purchased for $4 million seven years ago. You replace the roof and other components. The replacements create a $660,000 ordinary loss. If you’re in the 40 percent tax bracket, your immediate cash savings by claiming the deduction is $264,000.