Home prices are soaring, and those who sell now have to worry about profiting too much! Today, you'll learn how home improvements reduce home sale profits and the capital gains tax you may have to pay. If you live in a home for at least two out of five years, married couples can keep $500,000 profit tax-free, while single homeowners get a $250,000 exclusion. But often overlooked are the costs of home improvements and upgrades that can be added to what was paid for the home to reduce overall profit and save on capital gains. So what qualifies? Forget maintenance and repairs. Only permanent improvements that prolong the life span of your home increase its value. Adapting an area for a new use will also help the "bottom line." This includes remodeling, room additions, decks, landscaping, or a new roof, to name but a few. Over the years, keep careful records. Save all receipts and have cancelled checks to document what you've done and what it cost.