05 Apr How long do I need to keep paperwork for these homes?

Q. I have bought two properties over the years and each of them have been refinanced three or more times till now. I have so many legal papers stored, plus monthly bills, and I don’t know which I really need to keep. Help!
— Homeowner

A. Sorting through which records to keep regarding your properties versus those that can be thrown away can be daunting.

Let’s start with ownership records.

Any legal documents affecting your ownership of the properties such be kept permanently and securely until the properties are sold or otherwise transferred, said Gene McGovern, a certified financial planner with McGovern Financial Advisors in Westfield.

These would include the deeds, any title search documents, sale contracts, mortgages, release of lien documents, certificates of occupancy and the like, he said.

“Most other documents involve either tax matters or simply proving that something has occurred, such as a payment on a monthly mortgage,” he said. “Whether and how long to retain those records can vary quite a bit.”

For income tax purposes, any records that show how much you paid to acquire or improve the properties should also be kept permanently or until the properties are sold so that you can properly report how much you paid for them and determine the amount of gain or loss, he said. These would include the contract of sale, as well as invoices and receipts for any later capital improvements.

While you’ll want to keep paper copies of any legal documents, paper copies of most tax-related documents aren’t necessary, he said.

“The IRS is fine with electronic record-keeping, so long as the documents are legible and readable,” he said.

McGovern said you’ll also want to make sure that any documents you retain — whether print or digital — are kept securely.

“For paper copies, a safe deposit box provides excellent security,” he said. “For documents stored digitally, either on your computer or in the cloud, you’ll want to make sure they’re encrypted, so that sensitive information such as your Social Security number is not available to potential hackers.”

As for the monthly mortgage statements, there’s no need to keep copies other than the most recent one, he said.

“Nearly all banks have these available online, and the annual Form 1098 Mortgage Interest Statement that’s issued by the lender shows how much mortgage interest has been paid for tax purposes,” he said.

Also note that some of your unneeded documents may contain Social Security numbers or other sensitive information, so it’s a good idea to shred them before you throw them away, McGovern said.

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This story was originally published on April 5, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.