How long do I have to keep this stuff?

“How long do I have to keep this stuff?” is the usual question you ask yourself when feeling that you are running out of room for all this “paper” that may never be needed.

The paper receipt you get from your fast-food lunch may go directly into the trash. The prudent consumer may keep it to reconcile it with their monthly statement and then, trash it. The natural hierarchy with receipts and documents associated with purchases is that as the price or value goes up, the more important it is to keep them. The question becomes “but for how long?”

The following table will give you an indication on how long certain documents related to your home need to be kept according to best practices of tax professionals. IRS recommends that records are kept for three years from the date the taxpayer files their original return or two years from the date the tax was paid, whichever is later. There is no time limit in the case of fraud or failure to file a tax return.

Document	Length of time to keep
Home Purchase/Sale Documents
Home purchase documents	Duration of ownership + 3 years
Closing documents & statements	Duration of ownership + 3 years
Deed to property	Duration of ownership
Home warranty or service contract	Until expiration
Community/Condo Association Covenants	Duration of ownership
Receipts for capital improvements	Duration of ownership + 3 years
Mortgage Payoff statements or Release of Lien	Forever, in case proof is needed
Annual Tax Deductions
Property tax statement & cancelled check	3 years after IRS due date for return
Year-end mortgage statements	3 years after IRS due date for return
Federal tax returns	3 years after filing return or 2 years after paying tax, whichever is later
Insurance and Warranties
Home Inventory	Keep current
Homeowners insurance policy	Until the replacement is received
Service contracts and warranties	Until warranty/service contract expiration
Home repair receipts	Until warranty/service contract expiration

Going digital with your records can make them easy to keep as well as to find when you need them. Create a folder on your computer that automatically backs up to the cloud like Dropbox, Google Docs or OneDrive so that if something happens to your computer, you have them safely tucked away.

The main folder could be the address of your home with subfolders for purchase documents, capital improvements, warranties, etc.

When you receive statements that are already in digital format, simply move them to the correct folder and subfolder. If it is a paper format, scan it and save it in the proper folder so you will have it when you need it.

Rent your home tax free

There is a little-known provision in the tax code that allows homeowners to rent their principal residence or second home for up to 14 days a year without having to recognize the income. In this situation, the taxpayer does not deduct the rental expenses associated with the income.

There is no restriction on how much you earn. If your first or second home is in a desirable area where people are looking for short-term rentals, it could provide a windfall to the homeowner.

In cities where any big sports championships are played, there could be a market for a temporary rental of a home. Events like PGA tournaments, college basketball tournaments, Bowl games, NFL playoffs and others can create a demand for this type of rental.

For instance, there are people in Augusta, Georgia who rent their homes during the Master’s Golf Tournament each year. There are not a lot of hotel rooms in the area relative to the number of people who usually attend in non-pandemic years and the homes can fetch a nice daily rate.

There can be confusion about the different types of properties and what constitutes a home. The intended use coupled with actual experience will usually determine the type of property.

There are four types of property. A principal residence is the home you live in. There is income property that you rent and do not live in. There is investment property that is primarily held for an increase in value. And, there is inventory, which is related to your business like homes that are built or purchased to be flipped.

A second home is one that is used for the primary enjoyment of the owner in addition to their principal residence. Taxpayers are allowed to deduct the mortgage interest and property taxes on a first and second home up to specific limits. A vacation home could be another name for a second home but more accurately, it is a rental property that has more than 14 days of personal use during the year. It becomes a hybrid.

You might want to check with your insurance agent to see if your current policy covers temporary rentals, including liability in case of an accident involving personal injury. This could affect your decision as to whether you want to consider the rental.

For more information, see IRS facts about renting out a residential property or consult your tax professional.