This $2 Homeowner Hack Can Save You $1000’s!

When moving into a new home, there’s a lot to think about—decorating, organizing, and settling in. But there’s one simple, often-overlooked step that could save you thousands of dollars in the long run: investing in a $2 folder.

Yes, really. A humble two-pocket folder (preferably green, to symbolize money!) can be the key to easily keeping track of capital improvements—those upgrades and changes that increase the value of your home and help you save big when it’s time to sell.

Capital improvements are upgrades to your home that enhance its value, prolong its life, or adapt it to new uses. See what they are in this IRS publication on page 10. Think construction costs for additions, new HVAC or plumbing systems, installing a deck or fence, or even minor updates that will stay behind like grab bars in the bathroom.

When you eventually sell your home, these improvements can increase your cost basis—the amount you originally paid for your home, plus the value of qualifying upgrades. The higher your cost basis, the lower the taxable profit (capital gains) when you sell.

Without documentation, it’s almost impossible to claim these improvements for tax purposes. That’s where your $2 folder comes in.

Dedicate a folder or a large zippered pouch to store ALL the physical receipts. Whether it’s a major renovation or a minor upgrade, save those proofs of payment. Even smaller expenses, like under counter lights or landscaping projects, can add up over time.

I use a green two-pocket folder to organize my receipts with a page that lists the date, cost, vendor, and explanation of the expense with a running total for each year. Or you can take a digital approach and scan and save copies of your receipts for easy access and backup, using an app like Landlord Studio.

Imagine you purchased your home for $300,000. Over the years, you've made various improvements (adding a deck, replacing windows, etc.. ) totaling $50,000. When you sell your home for $500,000, your taxable gain is reduced from $200,000 to $150,000.

The info in your $2 folder just saved you from paying tax on $50,000!

It’s not just about saving money—it’s about peace of mind. When the time comes to sell, you won’t be scrambling to remember what you spent or trying to locate receipts from decades ago.

So, grab that $2 folder, pick a safe spot to store it, and start building your cost basis one receipt at a time. Your future self (and your bank account) will thank you.