When it comes to owning a home, vacation homes, or rental properties, you’ll want to know exactly where your documents are located. Make sure the documents for all your properties are safely stored. Don’t merely tuck them away somewhere and forget about them. These records can prove you don’t owe any taxes to the IRS. They can also prove your ownership rights to the land and building. Let’s take a look at various vital documents and why you’ll want to keep them stored in a known and safe place for physical documents, or uploaded to the cloud.
Documents for Proof of Purchase and Ownership
For any and all properties you own, including your primary residence, vacation homes, or even rental properties, knowing exactly where you keep your documents can save you a severe headache down the road. Your Settlement Statement shows the purchase price of your property plus other amounts like fees and taxes. This document is important for tax purposes. It is also necessary should the time come to sell your property. Even if you pay cash for your property, keep your Settlement Statement safe.
Your closing package is the next thing you’ll need to keep safe, which contains a collection of documents in two parts: your title documents and your mortgage loan documents. These prove your property belongs to you. This paperwork also tells you the terms of your financial agreement, such as any necessary interest rate and loan term. A copy of your Deed is also recommended, as it shows transfer of ownership between the seller and the buyer.
If you’ve purchased Title insurance, do you have a copy? You’ll need to know where it is to dispute any problems that could arise, such as unpaid property taxes, forgery of original documents, or anyone who would claim ownership of your property.
If you’ve transferred ownership of the property without money changing hands, you’ll need your Quitclaim Deed. A Quitclaim Deed is often executed in the event of a marriage, a divorce, or when transferring property to adult children or into a trust entity.
Cost Basis Records
Have you kept cost basis records for your property?
Cost-Basis = Your Price Price + Improvements – Losses
For tax purposes, the cost basis amount is the sum of the original purchase price + your improvements – losses. Tracking your basis becomes more complicated the longer you own your primary residence or make significant financial investments for improvements such as installing a pool, replacing a roof, remodeling a kitchen, or inheriting a home.
When owning residential rental property, owning a second home, converting your residence into a rental property, or even inheriting a home you need the expertise of an experienced tax practitioner to properly advise you. These home ownership situations and transactions necessitate more complex reporting.
If you sold a home during the red-hot real estate market, keeping cost basis records will help compute any potential gain on this event and thus income taxes due because you sold your property.
Have You Recently Renovated?
Did you take the opportunity to renovate your home during the pandemic? If so, keep all receipts of payments and invoices, including digital copies, for cost basis purposes and any warranty or repair claims with contractors. Renovations increase the resale value of your home, and the cost basis for income tax purposes. Keeping these receipts can also be useful if you need to appeal a property tax bill that soars after your renovation is completed.
Land Survey/Plat or Architectural Blueprints
Do you have any land survey or plat documents, maybe even architectural blueprints for either the exterior or interior of your home or properties? These can help avoid costly and aggravating property disputes with neighbors over a fence, a tree, or other situations where the property line matters.
You can also save time with these documents when remodeling if you have the construction or renovation history of your home or rental property. These documents can be helpful whether they show the history of the interior or exterior of the structure.
Whether for rental properties, vacation homes, or your primary residence, keeping these records saves you many hassles and headaches with your property that arise in the future. Do yourself a favor and keep them in a safe and secure place.
When you find yourself overwhelmed at the prospect of creating and keeping up with your home records, call us today. At Organized Instincts, our seasoned team of daily money managers will help you cure your home sweet home records blues. Schedule a free consultation today and learn how we take the worry away from you.