Year end offers a natural checkpoint for homeowners and future sellers. You gather documents, review cash flow, and set yourself up for a smoother filing season. You also give your future sale fewer surprises by tracking basis, improvements, and closing costs now rather than months after moving. The goal here is clarity. Know what to collect, what to label, and what to ask a tax professional before deadlines arrive. This article stays educational only. It does not replace individual tax advice. It gives you a clean list of moves that reduce friction, with two neutral references you can read today for guardrails, IRS guidance on tax considerations when selling a home and a homeowner year end overview from Exit Oceanside Realty’s education blog.
Start with records. Strong records turn filing into a task rather than a scramble. Pull your mortgage year-to-date statement from your servicer. That document shows interest paid, principal reduction, and escrow activity. Download monthly statements as a single PDF so your preparer sees the full story without logging into portals. Save your property tax bill and proof of payment for this calendar year. If you own a condo or townhome, save the year end association statement that lists monthly dues and any special assessments. If your lender issued a Form 1098 in prior years, file the current year copy in the same folder once it arrives in late January. Keep documents for improvements together in a second folder. Label each invoice with a short note such as roof replacement, window upgrade, or HVAC. Add dates, addresses, and payment method. Future you will thank present you when basis questions appear during a sale.
Next, review basis. Basis is your starting point for gain or loss calculations when you sell. You begin with purchase price, then you add closing costs that increase basis, such as title insurance and certain transfer taxes. You also add capital improvements. New roofs, full window replacements, kitchen remodels that change structure or layout, and major systems upgrades fit this category. Routine maintenance does not. People lose thousands in future tax exclusion because receipts sit in email inboxes or vendor portals. Pull them now. Create a single spreadsheet with date, vendor, amount, description, and whether the expense increases basis. Keep digital copies of invoices and permits with the spreadsheet. The IRS page above explains how basis works during the sale calculation and when exclusions apply. Read the section on gain exclusions and documentation, then mark any open questions for a CPA.
Think about energy improvements. High efficiency upgrades often qualify for federal credits when installed and in service during the tax year. Windows, doors, insulation, and certain HVAC systems fall under these rules. Save product labels and contractor certifications when available. Keep model and serial numbers. Credits differ from deductions. A credit reduces tax liability dollar for dollar, whereas a deduction reduces taxable income. That difference matters. Talk to a preparer about eligibility and lifetime limits before you file, then keep all proof in your records. A quick scan of certified equipment paperwork now prevents document hunting later.
Look at mortgage points and refinance history. Points paid on a purchase often enter deductions in the year paid if you meet IRS tests. Points paid during a refinance usually spread over the life of the loan unless you used a portion for qualifying improvements. Track both sets of facts. If you refinanced and then sold, remaining points sometimes enter the final year calculation. Save closing disclosures from every transaction. Label them clearly so your preparer sees interest, points, and escrow details at a glance.
Review property tax timing. Some owners prefer to prepay a portion of property taxes before December 31, while others avoid prepayment because of SALT caps and cash planning. The right approach depends on your full picture. Gather facts first. Pull tax bills, review paid amounts, then ask your preparer whether prepayment helps or hurts. If your escrow already paid the current installment, prepaying may not change your filing outcome. Avoid assumptions. Confirm with a professional who sees your total income and deduction landscape.
Address home office questions with discipline. A dedicated, regular, and exclusive workspace follows specific rules. If you qualify, square footage and method selection drive the result. Keep floor plans, photos of the space, and receipts for eligible expenses. If you moved during the year or converted a room back to general use, document dates. People often default to the simplified method because recordkeeping feels hard. Clean records make the decision easier and help your preparer select the method that serves you.
If you sold a primary residence this year, prepare for Form 1099-S and potential gain exclusion. Title companies often issue a 1099-S showing gross proceeds. That form alerts the IRS to a real estate sale. Your job is to calculate gain correctly. Subtract selling costs such as brokerage commissions, transfer tax, owner’s title, and deed prep. Then apply the primary residence exclusion if you qualify. Current law allows up to two hundred fifty thousand dollars of gain exclusion for single filers and up to five hundred thousand dollars for married filing jointly, subject to ownership and use tests along with look-back rules. The IRS resource above explains these conditions in plain terms. Read it carefully, then confirm details with your preparer. Documentation matters. Closing disclosures, proof of occupancy, and improvement receipts carry real weight if questions arise.
If you sold a property used as a rental or a mixed-use asset, prepare for depreciation recapture. Depreciation you claimed, or could have claimed, enters the math at sale. That concept surprises many owners who converted a home to a rental for a few years, then moved back in. Keep depreciation schedules from prior returns. Save records for capital improvements during the rental period. If you used a cost segregation study, file the report with your permanent records. Hand your preparer the full packet rather than a summary. Accurate inputs produce accurate outcomes.
If you own a rental and plan 1099 reporting to vendors, verify taxpayer identification numbers and addresses before December closes. Collect W-9 forms from contractors who cross filing thresholds. Issue and mail Forms 1099 where required in January. Missing forms trigger delays and penalties. Clean records avoid both. Save invoices with service dates, job descriptions, and amounts paid. Label payments that included both materials and labor. Year end is the right moment to bring order to this stack.
Timing for an early 2026 sale deserves a quick review now. If you expect to list in the first quarter, pull together everything you will need for a seller disclosure, plus tax-relevant receipts and reports. Buyers ask about roof age, system service history, and permits. A tidy folder helps your sale and supports your return. If you expect a gain near the exclusion limit, study the IRS page above, then speak with a preparer about the effect of closing dates, repair credits, and sale expenses. Strategy starts with facts, not guesswork.
Insurance documents also matter. Carrier declarations show coverage dates, deductibles, and endorsements. Save them with your tax files. If you filed a claim for wind, hail, or water during the year, add the adjuster’s summary and final invoices to your basis folder. Repairs that restore prior condition often do not increase basis, while replacements that upgrade materials or extend useful life often do. Mark the difference so you do not rely on memory later.
Charitable gifts tied to property sometimes enter the mix. If you donated building materials, fixtures, or personal property during a remodel, keep receipts and fair market value support. If you worked with a qualified organization on a deconstruction project, retain the appraisal and Form 8283. These details sit outside the sale calculation but still influence your filing. Accurate paperwork removes uncertainty.
Keep attention on escrow. Many servicers run annual escrow analyses in the fall. Compare the analysis to your tax bills and insurance declarations. Correct any mismatches before year end so shortages or overages do not surprise you during filing. Small adjustments now avoid refund delays and phone calls later.
Estate planning intersects with taxes in subtle ways. Title form, beneficiary deeds, and transfer on death provisions affect administrative steps during a sale by heirs. If you changed title this year through marriage, divorce, or estate work, save those recorded documents with your permanent file. Basis step-up rules work differently for community property and separate property in some states. Pennsylvania follows its own set of rules. Your estate attorney or tax professional should guide you here. Your role is documentation. Keep everything organized.
Now build a simple folder system. Use four folders, digital or physical. Folder one, annual tax forms. This holds 1098s, 1099-Ss, association statements, property tax receipts, and insurance declarations. Folder two, basis and improvements. This holds invoices, permits, and photos for projects that extend life or increase value. Folder three, sales and closings. This holds closing disclosures, payoff letters, and settlement statements for purchases, refinances, and sales. Folder four, rentals and 1099s if applicable. This holds W-9s, vendor invoices, lease summaries, and depreciation schedules. The method matters less than the habit. Keep everything in one place with clear names and dates. When you meet your preparer, you hand over a complete picture rather than a stack of loose papers.
If you expect to sell next year, align tax planning with marketing. Repairs that prepare the home for market rarely increase basis by themselves. Paired with replacements that extend life, they often support basis increases. Talk to a preparer before large outlays in December. If a roof reaches the end of useful life, an installation date before December 31 might influence your credit or deduction landscape when combined with other facts. A few targeted questions now protect you from assumptions that erode your outcome.
Use neutral references to keep your plan grounded. Read IRS guidance on tax considerations when selling a home for an overview of exclusions, documentation, and reporting. Scan Exit Oceanside Realty’s year end homeowner checklist for reminders on organizing statements, reviewing escrow, and preparing improvement records. Both sources reinforce the same theme. Facts and files drive smooth tax outcomes.
If you want a local real estate team to help you prep the market side while your CPA covers the tax side, meet us on About Albright Real Estate. If you want a quick call to line up contractors, photo timing, and listing dates that respect filing season and closing windows, reach out through Contact. Clear records, clean files, and a plan that respects tax rules set you up for a calmer listing and a cleaner return.
