Over the years in which you own the home, you should also keep copies of all paid invoices for all major repairs, improvements and additions that affect your cost basis in the home. Those improvements are called capital improvements and include the following: building an addition, replacing the entire roof, paving a driveway, installing central air conditioning, and rewiring. IRS Publication 551 , available at IRS.gov, provides detailed information for determining increases and decreases to your home’s cost basis.
Paid receipts for other home improvement items such as appliances, furniture, furnishings or decor should be retained indefinitely. In case of a fire or other casualty loss, these documents will be useful to establish the amount of your losses for insurance or the casualty-loss tax deduction.
Warranties covering appliances, materials or labor should be retained for the life of those warranties plus your state’s statute of limitations for breach of contract. Virginia has a five-year statute of limitations for breach of written contract. The District of Columbia and Maryland both apply a three-year statute. In each case the trigger date from which such a statute of limitations starts will also vary, so it’s best to keep these documents for the time stated in the statute or as long as you own the home.
Annual real-property tax bills and mortgage interest statements should be retained for three years after you file the tax return on which you claim them as tax deductions.
Utility bills — and incidental bills for repairs, upkeep and maintenance of the home, but not rising to the level of capital improvements — need only be kept until they are accurately reflected on your credit statements. With the prevalence of online banking and online bill delivery and payments, keeping the hard copy of these documents is even less of a issue, since the homeowner can have almost immediate access to these documents should it become necessary to challenge a charge.
IRS Publication 522 provides useful guidance on these and other record retention requirements.
Harvey S. Jacobs is a real estate lawyer in the Rockville office of Joseph, Greenwald & Laake. He is an active real estate investor, developer, landlord, settlement attorney and lender. This column is not legal advice and should not be acted upon without obtaining your own legal counsel.
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