|Keeping full and accurate homeowner records is vital for determining not only your home deductions but also the basis or adjusted basis of your home. These records include your purchase contract and settlement papers if you bought the property or other objective evidence if you acquired it by gift, inheritance, or similar means.You should also keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Here’s some expamples:
In addition, you should keep track of any decreases to the basis. Here’s some examples:
How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. And you must keep these records for as long as they are important for the federal law.
Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. (A period of limitations is the limited perios of time after which no legal action can be brought.)
For assessment of tax, this is generally three years from the date you filed the return. For filing a claim for credit or refund, this is generally three years from the date you filed the original return or two years from the date you paid the tax, whichever is later. Returns filed before the due date are treated as filed on the due date.
You may need to keep records relating to the basis of property (discussed earlier) longer than the period of limitations.
Keep those records as long as they are important in figuring the basis of the property. Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you.