Deductions & credits

You should save all of the paperwork that you need to prove the homes value for at least 7 years. This includes an appraisal or market analysis showing the value on the date of your father's death, and the receipts for all of your improvements. You only produce them if you are audited, but if you are audited and don't have them, your basis will be denied and you will owe a lot more tax.