Hello Dave,
When can I shred the documents from homes I have bought and sold over the years? Is there ever a need to hang on to closing documents, etc, past 2 years or so?
I would like to shred them. Please tell me if there is anything I need to keep. Thanks!
Have a great day,
— Diana, Grand Junction
Diana,
What a great question! Wow… It amazes me how many great questions I get and how relevant they are to everyday life! I never really think about some of these things because I know my wife will! LOL! She is the paperwork person in our house, and Lord knows I could not get along without her help on all the things she does behind the scenes that keep the ball moving forward. I joke all the time that her job is MUCH harder than mine, plus I would be horrible at it! I would never want her job! Moving on to your question.
From my research, it does not appear under any circumstances that 2 years is long enough! When you purchase a home, you should hold all your purchase contracts, closing documents, and loan documents for as long as you own the property. If you refinance and close out a loan It appears to be good practice to keep the records of your closed loan for at least 3 tax return years. Assuming that you filed your tax returns for each of the 3 years. After year 3, you should be able to shred a closed loan. As long as you have a loan that is open or “active,” you should keep all documents and payment history on record.
When you sell a property, it is a good practice to keep your documentation for seven years after the home sale. This appears to be based on the IRS’s timeline for audits. Apparently, the IRS has 3 years to audit your tax returns if good-faith errors are in question and six years if they suspect you underreported income. If you sold a home more than 7 years ago, I would believe that you are safe to have a shredding party!
I hope this helps you gain some clarity! I very much appreciate the question, as I had to do some research and thus learned a lot in the process. Please keep in mind that I am not an attorney or an accountant, and before you shred, you might consider asking one or both if the data here jives with their recommendation. On questions like these, I always get follow-up comments that are different from my recommendations, so I will preface all this by saying that this is to be used as a guide. With that disclaimer, thanks again and happy shredding!
Dave Kimbrough
The Kimbrough Team
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