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If there’s one thing homeowners know, it’s that there will never be a shortage of paperwork. Contracts, receipts, files, and records related to buying, improving, and selling homes over the years, and knowing who gets to keep them and for how long is not always clear.
Knowing which tax records to keep (and for how long) can help you save money and headaches over time. GOBankingRates details everything you need to know about tax records if you own a home.
What do the IRS rules say?
Per irMost homeowners must keep the tax return and supporting documents for at least three years after filing – this is the time the IRS has to audit the return, or file an amended return for you claiming a credit or refund.
That three-year window includes items directly related to your home, such as year-end mortgage interest statements (or Form 1098), property tax records and receipts for deductible home improvements. Making sure these are saved and organized can make your tax season much easier. Kiplinger.
That said, the IRS can examine your records going back six years if they suspect you underreported your income by 25% — meaning it’s worth keeping your records for more than three years if you can. Additionally, you must keep the documents that affect your home’s tax basis for as long as you own the property, and beyond that.
according to irSettlement statements, renewal receipts and closing documents can reduce your capital gains tax when selling. You would be advised to keep those records for at least three years after selling your home.
Knowing what tax records to keep, and for how long, can make not only your home ownership experience easier, but also your annual tax season. As with all things tax-related, knowing the rules can make a homeowner’s life much easier.