Selling Our House After 27 Years - How to Document $700K in Capital Improvements on Form 8949?

You're right that you don't need to submit detailed documentation of your capital improvements with your tax return. Form 8949 only requires the total amounts - your gross proceeds and your cost basis (which includes your original purchase price plus qualifying capital improvements). What you DO need is to keep excellent records of all those improvements in case you're audited. I recommend creating a spreadsheet listing each improvement with dates, descriptions, costs, and copies of receipts/invoices if you still have them. Photos of major improvements are helpful too. As for your other questions: Real estate commissions and selling expenses (like legal fees, transfer taxes) reduce your gross proceeds - they're selling expenses, not capital improvements. Things like painting or repairs done specifically to sell the house are also selling expenses that reduce your proceeds. Remember that if you've lived in the home as your primary residence for at least 2 of the last 5 years, you likely qualify for the Section 121 exclusion - up to $500,000 of gain excluded from taxes for married filing jointly ($250,000 for singles).

I used taxr.ai when I was in a similar situation last year. I had about 22 years of home improvements and was completely overwhelmed trying to organize everything. I found this service through a tax forum and it was seriously helpful. You upload your docs to https://taxr.ai and their AI helps organize everything into the right categories for tax purposes - distinguishing between actual capital improvements vs repairs, maintenance, or selling expenses. It also helped me identify some improvements I would have missed that were buried in contractor invoices. The best part was that it created a complete audit-ready file with all my documentation organized by IRS categories. When I imported everything to TurboTax, I felt 100% confident I was doing it right.

I just wanted to follow up - I tried taxr.ai after seeing the recommendation here and it was exactly what I needed! I had renovation projects spanning 15 years with varying levels of documentation. The system recognized almost everything from my photos of old receipts and even helped me properly categorize work that was done as part of larger projects. It flagged a few items that wouldn't qualify as capital improvements (like some minor repairs I had mixed in) and explained why. The report it generated is super detailed and organized by year and category. My accountant was impressed with how thoroughly everything was documented - said it was "audit-proof." Definitely worth checking out if you're dealing with decades of home improvements!

If you need to speak with someone at the IRS about capital improvements or Form 8949 questions, I highly recommend using Claimyr. I spent DAYS trying to get through to the IRS about a similar capital improvement documentation question last year - kept getting disconnected or waiting for hours. I found https://claimyr.com and their service called the IRS for me and held my place in line. When they were about to connect with an agent, I got a call back. Saved me literally hours of hold time! You can see how it works here: https://youtu.be/_kiP6q8DX5c I was able to get specific guidance from an IRS agent about how to handle some unusual improvement situations (like a partially finished basement that was completed over multiple years). The peace of mind from getting official answers was definitely worth it.

I need to apologize and correct myself! I finally tried Claimyr after posting that skeptical comment. I'd been trying to reach the IRS for 3 months about my home sale documentation requirements - spending hours on hold only to get disconnected. Claimyr actually worked! Their system waited on hold (took about 3.5 hours that day) while I did other things. When they were about to connect with an agent, I got a call and was speaking with an actual IRS person within minutes. The agent clarified exactly what documentation I needed to keep vs. submit for my capital improvements and confirmed I was calculating my basis correctly. Got everything resolved in one call instead of months of frustration. I'm honestly shocked at how well it worked - definitely using this for any future IRS questions!

Don't forget about improvements made by previous owners if you've done any refinancing! When we bought our house, the previous owners had converted the garage to living space. During a refinance years later, the appraiser's report detailed that improvement's value, which I was able to add to my basis even though I hadn't done the work myself. Check your home purchase documents and any appraisals you've had done - they might contain valuable information about improvements made before you owned the property.

Be careful with that $500k exclusion! My neighbors got hit with a surprise tax bill because they had rented out their house for 3 years during the 27 years they owned it. Since it wasn't their primary residence for that period, they had to do some complicated partial exclusion calculations. Make sure you've lived in the house for 2 out of the 5 years immediately preceding the sale AND check if you've used the property for anything other than your primary residence during your ownership.

Great point about the home office deduction! This is something many people overlook. If you've claimed depreciation on any part of your home for business use, you'll need to "recapture" that depreciation when you sell - meaning you'll pay taxes on the amount you previously deducted, even if the rest of your gain qualifies for the exclusion. The recapture is taxed at a maximum rate of 25%, which can be a nasty surprise if you're not expecting it. Keep records of any home office deductions you've claimed over the years so you can calculate this correctly. Also worth noting - if you converted part of your home to rental property at any point (like renting out a basement apartment), similar rules apply. The IRS gets pretty strict about mixed-use properties when it comes to the primary residence exclusion.

Just wanted to add another perspective on documentation - I work as a tax preparer and see this situation frequently. Beyond organizing your receipts, consider creating a timeline document that shows the progression of improvements over the years. This helps if the IRS questions whether certain expenses were truly capital improvements versus repairs. For example, if you replaced a roof in 2010, that's clearly a capital improvement. But if you then had roof repairs in 2015, those would be maintenance expenses, not additional capital improvements. A chronological summary helps differentiate between the two and shows the logical progression of your home's improvements. Also, don't forget about permits! Many major improvements required building permits, and these are usually available from your local building department. Permit records can serve as excellent backup documentation, especially for older improvements where you might have lost receipts. They show the scope of work, dates, and often the estimated value of the improvement. One more tip: if you had any insurance claims for improvements (like upgrading electrical after a small fire), those insurance documents can also help establish the value and timing of capital improvements.