Maximize Your Tax Savings: The Importance of Keeping Home Improvement Records Before Selling Your Home
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Many taxpayers don’t feel the need to keep home improvement records, thinking the potential gain when they sell their home will never exceed the amount of the tax code’s exclusion for home gains explained as follows.
Under the current version of the tax code, you are allowed to exclude from your income up to $250,000 ($500,000 for married couples) of gain from the sale of your primary residence if you owned and lived in it for at least 2 years (24 months) of the 5 years before the sale. You also cannot have previously taken a home-sale exclusion within the 2 years immediately preceding the sale. There is no limit on the number of times you can use the exclusion if you meet these time requirements; however, extenuating circumstances can reduce the amount of the exclusion. The home-sale gain exclusion only applies to your main home, not to a second home or a rental property.
As noted above, you must have used and owned the home for 2 out of the 5 years immediately preceding the sale. The years don’t have to be consecutive or the closest to the sale date. Vacations, short absences, and short rental periods do not reduce the use period. If you are married, to qualify for the $500,000 exclusion, both you and your spouse must have used the home for 2 out of the 5 years prior to the sale, but only one of you needs to meet the ownership requirement. When only one spouse in a married couple qualifies, the maximum exclusion is limited to $250,000 instead of $500,000.
If you don’t meet the ownership and use requirements, there are some situations in which a prorated exclusion amount may be possible. An example of this situation would be if you were required to sell the home because of extenuating circumstances, such as a job-related move, a health crisis or other unforeseen events. Another rule extends the 5-year period to account for the deployment of military members and certain other government employees. Please call this office if you have not met the 2 out of 5 rule to see if you qualify for a reduced exclusion.
But what if your home sale gain is more than the home sale exclusion? Then it is in your best interests to have kept home improvement records, since the costs of improvements can be added to your purchase price of the home to be used in determining the gain. So keeping the receipts for the improvements, even if only in a folder or a shoe box, may be useful in the future when you sell your home.
Here are some situations when having home improvement records could save taxes:
The home is owned for a long period of time, and the combination of appreciation in value due to inflation and improvements exceeds the exclusion amount.
The home is converted to a rental property, and the cost and improvements of the home are needed to establish the depreciable basis of the property.
The home is converted to a second residence, and the exclusion might not apply to the sale.
You suffer a casualty loss and retain the home after making repairs.
The home is sold before meeting the 2-year use and ownership requirements.
The home only qualifies for a reduced exclusion because the home is sold before meeting the 2-year use and ownership requirements.
One spouse retains the home after a divorce and is only entitled to a $250,000 exclusion instead of the $500,000 exclusion available to married couples.
There are future tax law changes that could affect the exclusion amounts.
Everyone hates to keep records but consider the consequences if you have a gain and a portion of it cannot be excluded. You will be hit with capital gains (CG), and there is a good chance the CG tax rate will be higher than normal simply because the gain pushed you into a higher CG tax bracket. Before deciding not to keep records, carefully consider the potential of having a gain more than the exclusion amount.
Home improvements include just about anything that will increase the value of the home, from big ticket items like remodeling a kitchen, adding another room or a swimming pool, and landscaping to smaller items like ceiling fans. But there are some home improvements that cannot be included in the cost of home improvements, or may be only partly included. Examples are items which qualify for tax credits such as home solar, home energy efficient improvements or those that qualify for a tax deduction such as handicap improvements. In addition, the costs of general maintenance or repairs, such as fixing leaks, painting (interior or exterior), and replacing broken hardware do not count as improvements.
If you have questions related to the home gain exclusion or questions about how keeping home improvement records might directly affect you, please give this office a call.
Hiring feels like growth. More people. More capacity. More momentum. But here’s what most business owners underestimate: The salary is just the starting point. By the time you factor in everything else, that “$70,000 hire” can quietly become a $90,000—or even $100,000—decision. And if you don’t plan for it? Hiring can slow your business down instead of moving it forward. Why Hiring Feels Simpler Than It Actually Is On paper, hiring looks straightforward. You need help. You set a salary. You make the offer. But the real cost doesn’t show up in the offer letter. It shows up in everything that comes after. The True Cost Breakdown (What Most People Miss) Salary is only one piece of the equation. Here’s what actually gets added on: 1. Payroll Taxes Employers are responsible for their share of: Social Security and Medicare Federal and state unemployment taxes That alone can add 7–10%+ on top of base salary. 2. Benefits (Even Basic Ones Add Up) Depending on your setup, this may include: Health insurance contributions Retirement plans Paid time off Even modest benefits packages can significantly increase your total cost per employee. 3. Software, Tools, and Equipment Every new hire needs access to: Software subscriptions Systems and platforms Equipment or workspace Individually small. Collectively meaningful. 4. Management and Training Time This is the most overlooked cost. New hires require: Onboarding Training Ongoing management Which means someone on your team is spending time not doing their core work. That’s a real cost—even if it doesn’t show up on a payroll report. Full-Time vs. Contractor: Not Always an Obvious Choice Hiring full-time isn’t always the best first move. In many cases, a contractor or fractional role can: Reduce upfront costs Eliminate benefit obligations Provide specialized expertise Give you flexibility as you grow This is why more businesses are turning to: Fractional CFOs Outsourced marketing teams Contract-based specialists It’s not about avoiding hiring. It’s about hiring intentionally. When Hiring Actually Hurts Growth It sounds counterintuitive—but hiring too early can create pressure instead of relief. Here’s how it happens: Revenue isn’t consistent yet Cash flow tightens Fixed payroll costs increase You feel pressure to “feed” the hire Instead of freeing you up… It adds stress to every decision. Growth doesn’t just come from adding people. It comes from adding people at the right time. A Smarter Approach to Hiring Decisions Before you make your next hire, ask: Is this role tied directly to revenue or efficiency? Can this function be outsourced first? Do we have consistent cash flow to support this long-term? What is the fully loaded cost—not just the salary? Because clarity here protects you later. What Strong Businesses Do Differently They don’t just hire when they feel busy. They hire when the numbers support it. They: Forecast the full cost Understand the ROI of the role Use flexible resources when needed Scale their team strategically—not reactively That’s what keeps growth sustainable. Final Thought Hiring is one of the biggest investments you’ll make in your business. Done right, it accelerates growth. Done too early—or without a full picture—it can slow everything down. The difference isn’t instinct. It’s clarity. Before your next hire, run the numbers—not just the salary. Contact Steven Brewer & Company CPAs today to evaluate the true cost of hiring, explore smarter staffing options, and make confident decisions that support long-term growth.
June 2026 Individual Due Dates June 1 - Final Due Date for IRA Trustees to Issue Form 5498 Final due date for IRA trustees to issue Form 5498, providing IRA owners with the fair market value (FMV) of their IRA accounts as of December 31, 2025. The FMV of an IRA on the last day of the prior year (Dec. 31, 2025) is used to determine the required minimum distribution (RMD) that must be taken from the IRA if you are age 73 or older during 2026. June 10 - Report Tips to Employer If you are an employee who works for tips and received more than $20 in tips during May, you are required to report them to your employer no later than June 10. You can use IRS Form 4070 or your own statement that includes your signature; name, address and Social Security number; employer's name (or establishment's name if different) and address; month or period the report covers, and total of tips received during that month or period. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 8 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed. June 15 - Estimated Tax Payment Due This is the last day to timely make your second quarter estimated tax installment payment for the 2026 tax year. Our tax system is a "pay-as-you-earn" system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the "pay-as-you-earn" requirement. These include: Payroll withholding for employees; Pension withholding for retirees; and Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding. When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis. Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than $1,000 (the "de minimis amount"), no penalty is assessed. In addition, the law provides "safe harbor" prepayments. There are two safe harbors: The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of what is owed in the current year, you can escape a penalty. The second safe harbor is based on the tax owed in the immediately preceding tax year. This safe harbor is generally 100% of the prior year's tax liability. However, for taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year's safe harbor is 110%. Example: Suppose your tax for the year is $10,000 and your prepayments total $5,600. The result is that you owe an additional $4,400 on your tax return. To find out if you owe a penalty, see if you meet the first safe harbor exception. Since 90% of $10,000 is $9,000, your prepayments fell short of the mark. You can't avoid the penalty under this exception. However, in the above example, the safe harbor may still apply. Assume your prior year's tax was $5,000. Since you prepaid $5,600, which is greater than 110% of the prior year's tax (110% = $5,500), you qualify for this safe harbor and can escape the penalty. This example underscores the importance of making sure your prepayments are adequate, especially if you have a large increase in income. This is common when there is a large gain from the sale of stocks, sale of property, when large bonuses are paid, when a taxpayer retires, etc. Timely payment of each required estimated tax installment is also a requirement to meet the safe harbor exception to the penalty. If you have questions regarding your safe harbor estimates, please call this office as soon as possible. CAUTION: Some state de minimis amounts, safe harbor estimates rules, and the dates estimate payments are due are different than those for the Federal estimates. Please call this office for particular state safe harbor rules. June 15 - Taxpayers Living Abroad If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, June 15 is the filing due date for your 2025income tax return and to pay any tax due. Those impacted by the terrorist attacks in Israel throughout 2024 and 2025 have until September 30, 2026, to file and pay taxes that are otherwise due on or after September 30, 2025, and before September 30, 2026. The Sept. 30, 2026 extension also applies to time-sensitive tax acts that were previously postponed by IRS. If your return has not been completed and you need additional time to file your return, file Form 4868 to obtain 4 additional months to file. Then, file Form 1040 or 1040-SR by October 15. However, if you are a participant in a combat zone, you may be able to further extend the filing deadline (see below). Caution: This is not an extension of time to pay your tax liability, only an extension to file the return. If you expect to owe, estimate how much, and include your payment with the extension. If you owe taxes when you do file your extended tax return, you will be liable for both the late payment penalty and interest from the due date. Combat Zone - For military taxpayers in a combat zone/qualified hazardous duty area, the deadlines for taking actions with the IRS are extended. This also applies to service members involved in contingency operations, such as Operation Iraqi Freedom or Enduring Freedom. The extension is for 180 consecutive days after the later of: The last day a military taxpayer was in a combat zone/qualified hazardous duty area or served in a qualifying contingency operation, or has qualifying service outside of the combat zone/qualified hazardous duty area (or the last day the area qualifies as a combat zone or qualified hazardous duty area), or The last day of any continuous qualified hospitalization for injury from service in the combat zone/qualified hazardous duty area or contingency operation, or while performing qualifying service outside of the combat zone/qualified hazardous duty area. In addition to the 180 days, the deadline is also extended by the number of days that were left for the individual to take an action with the IRS when they entered a combat zone/qualified hazardous duty area or began serving in a contingency operation. It is not a good idea to delay filing your return because you owe taxes. The late filing penalty is 5% per month (maximum 25%) and can be a substantial penalty. It is generally better practice to file the return without payment and avoid the late filing penalty. We can also establish an installment agreement, which allows you to pay your taxes over a period of up to 72 months. Please contact this office for assistance with an extension request or an installment agreement. Weekends & Holidays: If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday. Disaster Area Extensions: Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites: FEMA: https://www.fema.gov/disaster/declarations IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations June 2026 Business Due Dates June 15 - Employer's Monthly Deposit Due If you are an employer and the monthly deposit rules apply, June 15 is the due date for you to make your deposit of Social Security, Medicare, and withheld income tax for May 2026. This is also the due date for the nonpayroll withholding deposit for May 2026 if the monthly deposit rule applies. June 15 - Corporations Deposit the second installment of estimated income tax for 2026 for calendar year corporations. Weekends & Holidays: If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday. Disaster Area Extensions: Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites: FEMA: https://www.fema.gov/disaster/declarations IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations Are you looking for a CPA? Steven Brewer & Company is here for you! Request a quote with us today!
When a “Good Year” Still Feels Tight You finally have a year where sales are up and the books show a profit—yet your bank account feels like it missed the memo. You’re working harder than ever, but cash seems to disappear the moment it hits your account. If that sounds familiar, you’re not doing anything wrong—you’re just bumping into one of the most common challenges in business: confusing profit with cash flow. Profit tells you how your business looks on paper.
Cash flow shows how your business feels in real life. And while both matter, only one pays the bills. The Real-World Disconnect Here’s where the confusion usually starts: You invoice a client for $20,000 in December. On your profit and loss statement, that sale boosts your year-end numbers. But if the client doesn’t pay until February, that profit doesn’t do much to help you cover January’s rent, payroll, or taxes. Or imagine a landscaping company that buys $15,000 of equipment in spring to prepare for summer jobs. On paper, the expense is spread out over time—but in reality, that cash leaves your account today. The result? You’re profitable on paper but short on cash in practice. Why This Happens to So Many Business Owners Cash flow issues aren’t a sign of failure—they’re often a natural part of growth. When your business scales, so do your expenses, payment cycles, and timing gaps between money in and money out. The biggest triggers include: Delayed payments: Clients pay on their schedule, not yours.
Seasonal swings: Slow months still have fixed costs.
Inventory or supply purchases: You pay upfront, earn later.
Tax surprises: Profit may be taxable long before the cash arrives.
Without planning for those timing gaps, even healthy businesses can feel like they’re running on empty. Turning Chaos Into Control This is where working with a trusted financial professional can make all the difference. They can help you: Forecast cash flow so you see slowdowns before they happen.
Smooth out seasonality by building cash reserves during strong months.
Review expenses strategically to make sure growth doesn’t outpace available cash.
Even simple steps—like syncing invoicing and bill-paying schedules or setting aside a percentage of each payment for future expenses—can dramatically reduce stress and improve stability. Bottom Line Profit is your scoreboard. Cash flow is your oxygen.
You need both to survive—and thrive. If your business feels profitable on paper but tight in the bank, you’re not alone. Contact our firm today for guidance on building a cash flow plan that keeps your business strong through every season.