As a homeowner, you likely have a lot of paperwork associated with your home. From the initial purchase to upkeep and everything in between, many documents are created that tell your home's story both legally and financially. A number of these documents are needed when you file your taxes and may be required later if the IRS has questions about your return. The IRS recommends that taxpayers keep income-related documents and home improvement receipts in their files for at least three years and property-related documents for as long as they own the property.
HUD-1 Settlement Statement
The settlement statement is an important document, especially if you received the First Time Homebuyer Credit when it was in place. The statement lists actual costs, including fees and charges for the seller and buyer during the final stages of a home sale transaction. The settlement statement is also called the HUD-1, and it is administered through the U.S. Department of Housing and Urban Development. Other details included in the statement are the purchase price, points incurred by the buyer at the time of purchase and the amount of the buyer's mortgage loan.
IRS Form 1098
Homeowners with mortgages are usually eligible for the Home Mortgage Interest Deduction. Form 1098 includes important information from the lender about the amount of money the owner has paid out in interest. Interest paid on first and second mortgages, home equity and home improvement loans may qualify for deductions.
Other information on Form 1098 includes real estate taxes and points on a loan. Points on a loan are also called premium fees, origination fees or loan discounts. Lenders sometimes require borrowers to pay points on a loan in order to obtain lower interest rates or gain credit when the market is tight. Real estate taxes and points are also deductible on your taxes, so this form is very helpful come tax time.
Real Estate Tax Receipts
Real estate tax payments for the tax year are deductible. Usually, this information is included on your Form 1098, but it's also available on your real estate tax receipts. Deductions are not available on any portion of your real estate taxes that were for special purposes – such as access to special infrastructure projects.
Home Mortgage Contract(s)
Your loan contract has essential information in it such as your points information and escrow account details that are useful for filing your taxes. Points can be deducted under the Home Mortgage Interest Deduction. While your points should be reported on your Form 1098, information about them is also provided in your mortgage contract.
Additionally, taxes and other fees paid with funds in your escrow account may be deductible, too. As you take out home improvement or home equity loans, these documents are important to keep in order to support information you may use to obtain deductions on your taxes.
Receipts and Canceled Checks
Major home improvements and renovations may be deductible, along with improvements that increase your home's energy efficiency. Maintain a file of receipts and canceled checks for supplies, labor and materials for improvements that may be deductible when you file your taxes.
W-2 and 1099 Forms
Your income can help determine which deductions and credits you can use when you file your taxes. Everyone is required to provide proof of income and wages. Your W-2 from your employers, as well as 1099 forms from those you've provided contract labor for, create the full picture of your income over the course of a year. These forms are necessary in order to file your income taxes accurately.
The law requires you to report all income for the year. Additionally, some states offer tax credits for lower- and middle-income families who pay higher property taxes. Other homeowner credits and deductions are determined based on your income depending on the state where you live.
- Bankrate: A Rundown of Tax Documents You’ll Need to File Your Tax Return This Season
- Internal Revenue Service: Publication 530, Tax Information for Homeonwers
- MarketWatch: What the New Tax Law Will Do to Your Mortgage Interest Deduction
- IRS: About Form 1098, Mortgage Interest Statement
- IRS: Publication 530 (2018), Tax Information for Homeowners
Vicki Wright, writing and editing professionally since 1996, has extensive business management, marketing and media experience. Wright has a Bachelor of Science in socio-poltical communication from Missouri State University and became certified as a leadership facilitator from the Kansas Leadership Center in 2010.