When you sell your house, you can deduct home improvements like new flooring that have increased the property's value, as these permanent enhancements are added to your tax basis to potentially reduce taxes upon the sale of your home, as previously mentioned.
While the Internal Revenue Service may permit expense reconstruction to substantiate taxes using alternative information, they typically do not prosecute individuals for lost receipts; however, the IRS may disallow deductions for items or services lacking receipts or only allow a minimum deduction, even when invoking the Cohan rule.
To establish your property's tax basis for the IRS, you can substantiate the original cost with copies of your purchase contract and closing statement, while improvements should be supported by purchase orders, receipts, cancelled checks, and any relevant documentation received.
Conversely, a capital improvement is an enhancement that genuinely augments the home's value or enhances its functionality, such as finishing a basement or installing a new HVAC system, while tasks like fixing rain gutters or painting a bedroom are categorized as repairs.