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    How Long to Keep Tax Records and More: A Checklist

    For most tax deductions, you need to keep receipts and documents for at least 3 years.



    Unless you live in a Hollywood Hills mansion, you probably don’t have space to store years of tax and insurance paperwork, warranties, and repair receipts related to your home. But you need that paperwork if you need to prove you deserve the tax deductions you took, to file an insurance claim, or to figure out if your busted oven is still under warranty. To help you organize your piles of papers, we’ve created a handy checklist of how long to keep tax records.

    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.
    • Check with your state about state income tax records. Most states make you keep them as long as the federal government does — three years. But Montana wants you to keep them for five years. And Ohio recommends you hang on to them 10 years. Yes, an entire decade.
    • 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. The standard deduction has been increased, which means fewer people will itemize than have in the past.

    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

    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.


    Source: Houselogic

    Hash Tags: #Buyingahome #RichardMartinezRealtor #SellingaHome #MartinezRealtyTeam #Homeremodel #HomeTips

     

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