Here’s a checklist to help you decide what tax and home records to keep.
The federal tax law signed by President Donald Trump Dec. 22, 2017, goes into effect for the 2018 tax year and generally doesn’t affect tax filings for the 2017 tax year. Here’s a detailed summary of the changes.
Unless you’re living in the 123-room Spelling Manor, you probably don’t have space to store massive amounts of tax and insurance paperwork, warranties, and repair receipts related to your home.
But you’ll definitely want your paperwork at hand if you have to prove you deserved a tax deduction, file an insurance claim, or figure out if your busted oven is still under warranty.
To help you prioritize your paperwork, we’ve created a handy “How Long to Keep It” home records checklist.
First, a little background on IRS rules, which informed some of our charts:
The IRS says you should keep tax returns and the paperwork supporting them for at least three years after you file the return — the amount of time the IRS has to audit you. So that’s how long we advise in our charts.
Check with your state about state income tax, though. Some make you keep tax records a really long time: In Ohio, it’s 10 years.
The IRS can also ask for records up to six years after a filing if they suspect someone failed to report 25% or more of their gross income. And the agency never closes the door on an audit if it suspects fraud. Just sayin’.
Home Sale Records
HOME SALE RECORDS
Document
How Long to Keep It
Home sale closing documents, including closing statement
As long as you own the property + 3 years
Deed to the house
As long as you own the property
Builder’s warranty or service contract for new home
Until the warranty period ends
Community/condo association covenants, codes, restrictions (CC&Rs)
As long as you own the property
Receipts for capital improvements
As long as you own the property + 3 years
Mortgage payoff statements (certificate of satisfaction or lien release)
Forever, just in case a lender says, “Hey, you still owe us money.”
Why you need these docs: You use home sale closing documents and receipts for capital improvements records to calculate and document your profit (gain) when you sell your home. Your deed and mortgage payoff statements prove you own your home and have paid off your mortgage, respectively. Your builder’s warranty or contract is important if you file a claim. And sooner or later you’ll need to check the CC&R rules in your condo or community association.
Annual Tax Deductions
ANNUAL TAX DEDUCTIONS*
Document
How Long to Keep It
Property tax payment (tax bill + canceled check or bank statement showing check was cashed)
3 years after the due date of the return showing the deduction
Year-end mortgage statements
3 years after the due date of the return showing the deduction
Tax returns
3 years from the date you file your return or 2 years from the date you paid the tax, whichever is later
Why you need these docs: To document you’re eligible for a deduction or tax credit.
*These deductions are relevant if you itemize. Beginning with tax year 2018, the standard deduction has been increased, which means fewer people will itemize.
Insurance and Warranties
INSURANCE AND WARRANTIES
Document
How Long to Keep It
Home repair receipts
Until warranty expires
Inventory of household possessions
Forever (Remember to make updates.)
Homeowners insurance policies
Until you receive the next year’s policy
Service contracts and warranties
As long as you have the item being warrantied
Why you need these docs: To file a claim or see what your policy or warranty covers.
Investment Real Estate Deductions
INVESTMENT (LANDLORD) REAL ESTATE DEDUCTIONS
Document
How Long to Keep It
Appraisal or valuation used to calculate depreciation
As long as you own the property + 3 years
Receipts for capital expenses, such as an addition or improvements
As long as you own the property + 3 years
Receipts for repairs and other expenses
3 years after the due date of the return showing the deduction
Landlord’s insurance payment receipt (canceled check or bank statement showing check was cashed)
3 years after the due date showing the deduction
Landlord’s insurance policy
Until you receive the next year’s policy
Partnership or LLC agreements for real estate investments
As long as the partnership or LLC exists
Landlord insurance receipts (canceled check or bank statement showing check was cashed)
3 years after you deduct the expense
Section 1031 (like-kind exchange) sale records for both your old and new properties, including HUD-1 settlement sheet
As long as you own the property + 3 years
Why you need these docs: For the most part, to prove your eligibility to deduct the expense. You’ll also need receipts for capital expenditures to calculate your profit (gain) or loss when you sell the property. Landlord’s insurance and partnership agreements are important references.
Miscellaneous Records
MISCELLANEOUS RECORDS
Document
How Long to Keep It
Wills and property trusts
Until updated
Date-of-death home value record for inherited home, and any rules for heirs’ use of home
As long as you or spouse owns the home + 3 years
Original owners’ purchase documents (sales contract, deed) for home given to you as a gift
As long as you or spouse owns the home + 3 years
Divorce decree with home sale clause
As long as you or spouse owns the home + 3 years
Employment records for live-in help (W-2s, W-4s, pay and benefits statements)
4 years after you make (or owe) payroll tax payments
Why you need these docs: Most are needed to calculate capital gains when you sell. Employment records help prove deductions.
Organizing Your Home Records
Because paper, such as receipts, fades with time and takes up space, consider scanning and storing your documents on a flash drive, an external hard drive, or a cloud-based remote server. Even better, save your documents to at least two of these places.
Digital copies are OK with the IRS as long as they’re identical to the originals and contain all the accurate information that was in the original receipts. You must be able to produce a hard copy if the IRS asks for one.
Tip: Tax season and year’s end are good times to purge files and toss what you no longer need; that’s often when the spirit of organization moves us.
When you do finally toss out your home-related paperwork, use a shredder. Throwing away intact documents with personal financial information puts you at risk for identity theft.
This article provides general information about tax laws and consequences, but isn’t intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.
