How long to retain old loan documentation

Financial Planning Tax Strategies
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I think this is both a tax issue and an estate issue.

Years ago, I was taught to keep forever all documentation that proved large loans were paid off, such as former mortgages and car loans. Is that still true? (Of course, you would keep the documentation for all real estate and cars you currently own.)

Is it OK to shred these things at some later date? 7 years after the sale? 10 years? Is this documentation EVER required for any reason? For tax reasons, the old capital gains primary residence rules used to require you to keep records of previous real estate sales. Is this still required? Keep them just in case the rules change?

Years ago, almost all consumer loan interest was tax-deductible, but that is no longer the case. I can understand keeping car loan documentation for some length of time after selling a car in case there is any question about clear title.

Is there a limit on how long estate asset issues can be contested?

If you keep the real estate documentation, how much do you keep? The tax returns and supporting documentation for the year the real estate was bought and sold? All of the old Agreements of Sale? The copy of the deed?

For example, I bought my first house in 1987 and it was sold in 1997. I had a house built in 1998 that was sold in 2000. I bought a house in 2003 that was sold in 2005. I bought my current house in 2006 and it will be sold this year. I am under contract to buy a house this year.

I still have all of my tax records starting from 1980 when I had my first fast food job. I know I should have destroyed a lot of this years ago. I’ve been given great direction on how long to retain tax records associated with my business, but I am more cautious about destroying personal records.

I am almost done sorting, shredding, filing, storing paperwork from my parents’ estate – probably keeping a little more than necessary. I am in the process of moving into my retirement home and trying to lighten the load for the poor soul who will have to clean out my stuff when I leave this planet.

HHP

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Is it OK to shred these things at some later date? 7 years after the sale? 10 years? Is this documentation EVER required for any reason?

For cars that you no longer own, I would just check to be sure that your credit report shows the loan as being paid in full. For real property that you no longer own, be sure that the loan release is properly recorded with the auditor/recorder in the locale where the real property is located, and that it shows on your credit report as being paid off.

For tax reasons, the old capital gains primary residence rules used to require you to keep records of previous real estate sales. Is this still required? Keep them just in case the rules change?

If a house that you currently own includes capital gains that were rolled into it from one or more houses sold prior to the tax law change in 1997, then you need to keep the records from those pre-1997 sale to be able to show the correct basis in the home you currently own. If you don’t own any houses that had pre-1997 capital gains rolled into them, then you don’t need to keep records from prior houses. You only need to keep records based on the rules as they are now.

If you keep the real estate documentation, how much do you keep? The tax returns and supporting documentation for the year the real estate was bought and sold? All of the old Agreements of Sale? The copy of the deed?

Records showing the details of the purchase, the costs of any improvements/upgrades you have made and, if your current house includes rolled over gains from a home sold prior to May 7, 1997, the records for that house, including the tax return where the gains were shown as being rolled over.

For example, I bought my first house in 1987 and it was sold in 1997. I had a house built in 1998 that was sold in 2000. I bought a house in 2003 that was sold in 2005. I bought my current house in 2006 and it will be sold this year. I am under contract to buy a house this year.

If the 1997 sale occurred on or after May 7, 1997, then none of your home sales were subject to the carryover capital gains rule. Even if the sale in 1997 was on May 6 or before, the carryover of the capital gains should have been accounted for when you sold the house in 2000. At this point, you need records of the purchase and any improvements/upgrades you’ve made to your current home.

AJ

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