What Documents to Keep After Selling a Home?

Selling a home involves numerous documents. Understanding which ones to retain after the transaction concludes is important for financial clarity, supporting future endeavors, and navigating potential inquiries. Organizing these documents ensures necessary information is readily accessible, preventing complications.

Documents for Tax Reporting

Retaining specific documents is important for accurate tax reporting related to the sale of your home. The Internal Revenue Service (IRS) requires detailed records to verify figures reported on tax returns. These documents support any claims for exclusions or adjustments to the sale proceeds.

You will receive Form 1099-S, “Proceeds from Real Estate Transactions.” This form reports the gross proceeds from the sale or exchange of real estate to the IRS. The entity responsible for closing the transaction, such as the title company or closing agent, issues this form. The information on Form 1099-S, including the closing date and gross proceeds, must be reported on your tax return, even if you do not believe you owe taxes on the sale.

The Closing Disclosure (CD) or the HUD-1 Settlement Statement (for older transactions) are used for calculating any taxable gain or loss. These statements itemize the sale price, selling expenses, and other adjustments. Selling expenses, such as real estate commissions, attorney fees, and title insurance, can reduce the amount of taxable gain. The home’s purchase price and certain original closing costs contribute to the property’s “cost basis,” which is subtracted from the sale price to determine the gain.

Records of home improvements are important because they can increase your property’s cost basis, reducing your taxable gain. Capital improvements add value, prolong useful life, or adapt the home to new uses, such as a room addition or kitchen renovation. These differ from minor repairs, which are not added to the cost basis. Keep invoices, contracts, and receipts for these improvements to substantiate the increased basis.

Retain home sale and improvement records for at least three years after filing your tax return for the year of the sale, as this is the typical IRS audit period. Some recommend keeping them longer, up to six or seven years, for extended audit periods or inherited property sales.

Essential Transaction Records

Beyond tax implications, certain documents serve as proof of the real estate transaction and transfer of ownership. These records confirm the sale occurred and that all financial obligations related to the property have been satisfied. Maintaining these documents ensures a clear chain of title and provides evidence of the completed transaction.

The recorded deed is a document to retain, as it proves the transfer of ownership from you to the new buyer. While ownership may pass upon signing, recording the deed with the county or city recorder’s office provides public notice of the change. This protects against future claims or disputes over the property’s title and safeguards the new owner’s property rights.

The final Closing Disclosure (CD) or HUD-1 Settlement Statement serves as a record of the transaction’s financial aspects. This document details the sale price, loan amounts, and all closing costs and credits for both the buyer and seller. It serves as proof that the sale was finalized and outlines the financial terms agreed upon, acting as a receipt for the entire transaction.

A loan payoff statement is an important document, especially if you had a mortgage or home equity loan on the property. This statement provides proof that any outstanding loans secured by the property were paid off at closing. It confirms the amount needed to satisfy the loan and ensures the lender releases their claim on the property. Retaining this statement helps prevent future inquiries regarding the loan’s status.

If any personal property was included in the home sale, such as appliances or furniture, keep a separate bill of sale. This document evidences the transfer of title for these items, distinct from the real property. It identifies the personal property sold and the terms of its transfer.

Supporting Financial and Property Details

In addition to tax and transaction records, other documents are useful to retain for future reference, even if they do not have direct tax or proof-of-sale implications. These documents offer supplementary information for non-tax-related reasons or potential inquiries. They provide historical context about the property and its financial aspects.

Retaining past property tax statements is useful, as they provide a record of the assessed value and tax payments made during your ownership. These statements can be useful if there are future questions about property valuations or tax history. While not directly impacting the sale, they contribute to a complete financial picture of your property ownership.

Records of homeowners insurance policies and any claims made during your ownership can be valuable. This history might be relevant for your personal insurance records or for post-sale inquiries related to property damage during your tenure. Maintaining these records provides a clear timeline of coverage and claims.

Appraisal and inspection reports from the time of sale offer an assessment of the property’s condition and value. These reports serve as documentation, providing a snapshot of the home’s state at transfer. They might be useful if questions arise about the property’s condition or market value at the time of sale.

If a home warranty was provided by you as the seller to the buyer, keeping a copy of the warranty information is useful. This ensures you have a record of the terms and coverage provided. If the property was part of a homeowners association (HOA) or condominium association, retaining relevant HOA or condo association documents can be helpful for your records, especially concerning any fees or regulations that applied during your ownership.