"Seems like it'd be tough for them to single out just the significant jumps."
Yeah, agreed. The IRS isn't really tracking every little home improvement—honestly, they don't have the resources or interest for that. But you're right about documentation; if anything ever raises a red flag, having receipts and records can save a lot of headaches. I had a friend who made major upgrades without keeping good records and spent months sorting things out later... not fun. Better cautious than sorry, IMO.
I get your point about documentation, but honestly, I wouldn't underestimate the IRS's ability to spot significant jumps. Sure, they're not combing through every minor kitchen remodel or bathroom upgrade, but when you suddenly have a huge spike in home value or equity, it can stand out more than you think. I've seen people assume they're flying under the radar, only to get hit with an audit because their numbers didn't line up with neighborhood averages or market trends.
A buddy of mine flipped a property and didn't think much about keeping detailed records—figured he'd just ballpark it if needed. Well, guess what? He got flagged because his reported improvements didn't match the appraisal jump. Ended up costing him way more time and stress than if he'd just tracked things properly from the start.
So yeah, maybe the IRS isn't watching every little thing, but significant jumps aren't as invisible as people assume. Better safe than sorry is right, but don't underestimate their ability to spot inconsistencies either...
Fair points, but do you really think the IRS is that tuned into neighborhood averages and market trends for every area? I mean, sure, if you're flipping houses left and right or suddenly claiming your modest ranch turned into a mansion overnight, that's gonna raise some eyebrows. But for most homeowners just doing typical upgrades—like adding a deck or finishing a basement—do you think they're really cross-checking Zillow listings and local comps?
I had a client once who was super paranoid about this stuff. He kept receipts for literally everything—down to the last box of nails. When he finally got audited (for something totally unrelated, btw), the auditor barely glanced at his home improvement records. It was almost disappointing after all that meticulous record-keeping drama, lol.
Not saying documentation isn't important—it definitely is—but maybe the IRS isn't quite as eagle-eyed about home equity jumps as we sometimes fear?
Honestly, I doubt they're digging that deep into Zillow or local comps unless something really stands out. I've refinanced a couple of times and did some decent renovations—new kitchen, finished basement—and never had any issues or even questions from the IRS side. Still kept receipts though, just in case...but now I'm wondering if that was mostly for my own peace of mind, lol. Anyone else feel like we're maybe overthinking this stuff a little?
You're probably right about the IRS not diving too deep into Zillow or comps unless something's way off. But isn't it funny how we all keep receipts "just in case"? Maybe it's just human nature to overthink these things a bit...
