Your CPA Knows What You Paid for the House. Does Anyone Know What You've Spent Since?

By Shannon and Jon Yoffie | Yoffie Real Estate Group | Published September 2, 2026

Last week's post named five things a real estate advisor should be watching for you between the day you buy a home and the day you sell it: insurance, maintenance, remodeling, title and property tax, and refinancing. Two of those, remodeling and property tax, turn out to be harder to track than the other three, because the record you need doesn't arrive in the mail. Nobody sends you a statement for it. You have to have kept it yourself, and most homeowners haven't.

This is the second half of the remodeling question we didn't fully answer in Why Not a Real Estate Advisor?: not whether a project adds to your home's value, but whether it adds to what the IRS thinks you paid for it. Those are two different tests, and only one of them shows up on your tax return.

Two Kinds of Spending, One Line the IRS Actually Cares About

A new water heater and a leaking faucet repair can look nearly identical on a credit card statement: similar dollar amount, same contractor, same general "house stuff" mental bucket. The IRS does not see them the same way at all.

A repair keeps your home in its normal working condition. Fixing a leak. Patching a hole in the drywall. Repainting a room the color it already was. Necessary, often overdue, and it doesn't change what you're considered to have paid for the house.

A capital improvement is different. It adds value, extends the home's life, or adapts it to a new use:

• A new roof, full replacement, not a patch.
• A finished basement or room addition.
• A kitchen or bathroom remodel.
• A new HVAC system, water heater, or solar install.

Those add to your cost basis, the number the IRS uses later to figure out how much of your eventual sale price actually counts as taxable gain.

The Difference Doesn't Show Up Until You Sell

Basis is roughly what you paid for the house, plus whatever you've genuinely put into it in capital improvements over the years you've owned it. Sale price minus basis is your taxable gain, before the exclusion. Every dollar of documented improvement lowers that number, dollar for dollar.

For most sellers this stays theoretical, thanks to Section 121: up to $250,000 of gain is excluded from tax for a single filer, $500,000 for a married couple filing jointly, on a primary residence. A lot of homeowners hear that number and assume basis tracking isn't really their problem.

It matters more than that in the markets we work in. A homeowner who bought in El Dorado Hills or Serrano for $650,000 a decade ago and sells today for $1.4 million has $750,000 of gain before basis even enters the conversation. At that point, $150,000 in documented kitchen, roof, and HVAC work over the years isn't a rounding error.

The Credit a Lot of Homeowners Think They Still Have

If you renovated in 2025 with an energy-efficiency tax credit in mind, it's worth a direct conversation with your CPA before you assume it's still there.

The Energy Efficient Home Improvement Credit, the one covering windows, doors, and heat pumps, and the Residential Clean Energy Credit, the one covering solar and geothermal, both ended for anything placed in service after December 31, 2025, under this year's federal tax changes. That's an exact date, not an estimate, straight from the IRS's own guidance.

The window-and-door credit can't be carried forward. If you didn't have enough tax liability to use it for 2025, that amount is gone, not banked for next year. The solar and geothermal credit is a little more forgiving, unused amounts there do carry forward, but only for property that went in before the cutoff.

What's Actually Still Deductible Going Into 2026

Three things worth knowing if you itemize.

Mortgage interest is capped at interest on the first $750,000 of acquisition debt for loans taken out after December 15, 2017 ($375,000 if married filing separately). That cap was scheduled to jump to $1 million on January 1, 2026 when an earlier tax provision expired. It didn't. This year's legislation made the $750,000 limit permanent instead, so anyone who was waiting on the higher number isn't getting it. Loans from before December 16, 2017 keep the older $1 million ($500,000 MFS) limit.

The SALT cap, the limit on deducting state and local taxes including property tax, rose to $40,400 for 2026, up from $40,000 the year before. It phases out for higher earners once modified adjusted gross income passes $505,000 ($252,500 married filing separately), dropping 30 cents for every dollar over that line until it bottoms out at a $10,000 floor.

Mortgage insurance premiums, PMI on a conventional loan, FHA and VA funding fees, USDA guarantee fees, are deductible again starting with premiums paid in 2026, after being unavailable since 2022. It phases out starting at $100,000 AGI ($50,000 MFS), and it's fully gone by $110,000 AGI. If your loan carries PMI, this is worth flagging to whoever prepares your return. It's new enough this year that some preparers won't think to ask.

Inherited a Home? There's a Second Clock Besides Prop 19

Last month's post covered the Proposition 19 clock: a child who inherits a parent's home keeps the lower property tax assessment only if they move in within a year and file the paperwork within three. That's the county side. There's a separate, IRS side to the same moment that's easy to miss, because it happens automatically instead of on a deadline.

When you inherit a home, your basis generally isn't what your parent originally paid for it. It steps up to the home's fair market value on the date they died. Parents who bought decades ago for $180,000, in a home now worth $1.2 million, hand their child a basis of roughly $1.2 million, not $180,000, for the purpose of figuring gain on a future sale.

Ask your CPA and, if the estate involves California real property, an estate attorney about it directly. It's exactly the kind of overlap where a real estate advisor and a CPA should be talking to each other, not just to you separately.

What We Actually Track So You Don't Have To

This is the same argument as last month's post, aimed at a narrower target: the advisor relationship exists so someone knows to ask the right question at the right moment, not so you become your own CPA.

We built a one-page tracker for exactly this: a place to log every project as it happens, the date, what it was, whether it was a repair or an improvement, the amount, the contractor, whether a permit was pulled, whether you kept the receipt. It's free, and it's the kind of thing you want started years before you're anywhere near listing, not assembled from memory and old email receipts the week your agent asks for it.

Frequently Asked Questions About Home Improvements and Your Taxes

Is property tax deductible?

Yes, up to the combined SALT cap of $40,400 for 2026. That cap phases out for households with modified adjusted gross income above $505,000 ($252,500 married filing separately) and never drops below a $10,000 floor.

What's the mortgage interest deduction limit for 2026?

Interest on the first $750,000 of acquisition debt for loans originated after December 15, 2017 ($375,000 married filing separately). This year's tax legislation made that limit permanent rather than letting it rise to $1 million as previously scheduled. Loans from before December 16, 2017 keep the older $1 million ($500,000 MFS) limit.

Is home insurance tax deductible?

Not for a primary residence you live in yourself. Homeowners insurance on your own home generally isn't deductible, though it can be for a rental or business-use property. That's a separate question from whether your coverage is actually adequate, which is worth checking on its own.

Is PMI (mortgage insurance) tax deductible in 2026?

Yes, again, for the first time since 2022. Premiums paid starting January 1, 2026 are deductible on Schedule A, phasing out between $100,000 and $110,000 of AGI ($50,000 to $55,000 married filing separately).

Is there still a home energy tax credit in 2026?

No. The credits covering windows, doors, heat pumps, solar, and geothermal installations ended for anything placed in service after December 31, 2025.

Is there a tax deduction for buying a house?

Not for the purchase itself, but the mortgage interest, property tax, and PMI on the loan you take out to buy it can be deductible if you itemize, subject to the caps above. Points paid at closing can sometimes be deducted too, and that one's worth a direct conversation with your CPA since the rules depend on your specific loan.

The Bottom Line

None of this changes what your house is worth today. It changes what you owe the day you sell it, and that number gets built years in advance, one receipt at a time, not reconstructed the week you list. Track it as you go and the difference is a spreadsheet. Don't, and it's a guess your CPA has to defend without documentation.

Jon Yoffie and Shannon Yoffie of Yoffie Real Estate Group work with El Dorado Hills homeowners on exactly this kind of thing, well past closing day: insurance, permits, receipts, the paperwork that actually determines what a home is worth when the numbers finally matter.

Data sources: IRS FAQs on the accelerated termination of energy provisions under the One, Big, Beautiful Bill (Aug 21, 2025); IRS Publication 936, Home Mortgage Interest Deduction; the 2026 SALT cap and PMI deduction restoration as confirmed across independent CPA and tax-planning sources, re-verified Aug 30, 2026. Figures reflect federal tax law current as of publish date and are subject to change.

About the author: Shannon and Jon Yoffie are co-founders of Yoffie Real Estate Group at 4359 Town Center Blvd, Ste 217, El Dorado Hills, CA 95762. The Yoffie Group advises buyers, sellers, and homeowners across El Dorado Hills, Serrano, Blackstone, Folsom, and Cameron Park. Reach them at (916) 941-6566 or theyoffies@yoffierealestate.com.

Jon and Shannon Yoffie are real estate advisors, not financial, tax, or legal advisors. This post is for general education only and is not tax or legal advice. Talk to your CPA or a qualified tax professional before making decisions based on it.