How Long Should You keep Real Estate Documents?

Most of us are deluged with paperwork. Even worse, most of us are not quite sure how long we should hold on to real estate, tax, insurance, repair, and warrantee documents, etc. We fear that the one document we decide to discard, is precisely the one that we will be asked for by the IRS, an attorney, or a manufacturer.

Let’s take them one at a time.

Federal Tax Documents: The IRS suggests that we keep tax paperwork and the supporting documents for at least three years. The IRS actually states they won’t commence an audit beginning more than three years ago. But there is an exception to their rule. If the IRS suspects fraud, they can ask for returns and documentation for an unspecified amount of time. According to Consumer Reports, if the IRS thinks you have not reported all of your income on any of your your tax returns, they, in fact, have six years to begin legal proceedings. Therefore, it might be wise to keep these documents for seven years.
State Tax Documents: Most states follow the IRS rule of three years. But a few states (Ohio and Montana among them) offer their residents different advice. So, with state tax paperwork, it is best to check with the state you reside in. (Also, importantly, directives can change over time.)
Home Sale Records: Closing documents and receipts for capital improvements should be kept as long as you own the property plus an extra three years. As a side benefit, this will help you calculate your profit when you sell your home.
Deed to the home and community/condo association covenants should be keep as long as you own the property. Your deed proves you own the home.
The builder’s warranty or service contract should be kept until the coverage period ends.
Mortgage Payoff Statement and Certificate of Lien Release: This also proves you own your home in full. Never discard these documents. You never know when a bureaucratic foul-up leads a bank to think that you still owe money. This has caused innocent folks aggravation and legal fees until matters are cleared up.
Annual Tax Deductions/Property Tax Statements: Keep these documents for three years after the due date showing the deduction.
Year-end Mortgage Deductions: Keep these documents for three years after the due date of the return showing the deduction.
Home Repair Receipts: Keep until the Warrantee expires.
Homeowners Insurance Policy: Keep until the new policy arrives.
Appliance Warrantees: Keep until the warrantee expires and then a little longer. Tip: Some companies will honor a warrantee if the appliance warrantee expired shortly after the warrantee end date. For example, I’ve had the good fortune with this dealing with Sony and Cuisinart.
Partnership or LLC Agreements for Real Estate Investments: Keep for as long as the partnership or LLC exists.
Employment Records for Live-in Help (W-2s, W-4s): Keep for four years after you make payroll tax payments.

Final Tip: When discarding any financial documents, shred them first – they often contain sensitive information (SS#s, Bank account information, etc.).