What Documents to Keep When Downsizing Your Home

For Anyone Sorting Papers Before a Move

Sorting a lifetime of paper is one of the quieter jobs in a move to a smaller home, and it is easy to put off. Some papers can be cleared out without a second thought. Others protect your identity, your health care, your retirement income, your investments, and your tax picture for years to come. A few will matter long after the sale, when a certified public accountant (CPA) works out how much profit from the sale, if any, is taxable. Knowing which papers belong in which group makes the sorting go faster.

Papers to Keep for Good

The Federal Trade Commission (FTC) keeps a list of papers to hold on to for good and keep locked up. It includes birth certificates and adoption papers, Social Security cards, passports and citizenship papers, marriage licenses and divorce decrees, military records, and the death certificates of family members.

Wills, living wills, and powers of attorney are on that list too. If you have a trust, keep the trust documents with them. Original wills, powers of attorney, and similar legal papers are best kept where a trusted family member can find them. The attorney who prepared them can tell you which originals to hold.

Retirement and pension plan papers belong on the list as well. If you have an individual retirement account (IRA), the Internal Revenue Service (IRS) says to keep the yearly tax forms showing your contributions and withdrawals until every withdrawal has been made.

Vital health records are on the FTC list, especially older ones from before electronic records. If you are unsure which of your records count as vital, your doctor's office can tell you. The IRS also advises keeping records of your own and your family members' health care coverage.

Because these are the papers most worth protecting, carry them yourself on moving day instead of packing them with everything else.

Insurance, Benefit, and Account Information

Start with life insurance. The National Association of Insurance Commissioners (NAIC) suggests keeping a current copy of each policy with your will or other estate papers in a safe place where your family can find it and letting your beneficiaries know the policy exists. It also helps to tell them the name of the insurance company and where the policy is kept.

The National Institute on Aging suggests collecting the basics a family member would need in an emergency. That includes your insurance information for life, health, long-term care, home, and car, with the policy numbers and your agents' names and phone numbers. It also includes your Social Security and Medicare information and a list of your banks and accounts. Add your mortgage and other debts, with how they are paid, and the location of your home deed and car title. Keep each policy for as long as it is valid, and ask your insurance company or agent before you discard one that has ended.

If you keep papers in a safe deposit box, keep copies at home and note where the box is located and where the key is kept. Your yearly Social Security benefit statement, Form SSA-1099, goes with your tax papers.

Records That Show What the Home Cost You

The IRS uses the word basis for what you have invested in a home. It starts with the price you paid plus certain costs paid at closing, and it grows with the cost of improvements. Your profit on the sale is the sale price, less selling costs, minus your basis, so the papers that support your basis matter to a CPA.

IRS Publication 523 lists several purchase costs that belong in that figure, including legal fees for the title search and the deed, recording fees, survey fees, transfer taxes, and an owner's title insurance policy. The closing statement from when you bought the home shows many of these costs, so it goes in the keep pile.

Improvements follow the same idea. The IRS describes them as work that adds to the home's value or prolongs its useful life, and Publication 523 gives examples such as a new roof, a heating and air conditioning system, a kitchen remodel, new flooring, a deck, a fence, and an added bathroom. For each project, keep the contractor's invoice and proof that you paid it. A CPA can say which of your projects the IRS treats as improvements.

A few other papers can matter to a CPA as well. If an insurance company ever paid for damage to the home, keep the claim and the repair papers. If the city, the county, or a condominium association billed you a special assessment for a local improvement, keep that bill. If part of the home was ever used for a business or rented out, keep those records too. If you received the home as an inheritance or a gift, keep the papers that show when you received it and what it was worth then. For a gift, Publication 523 also says to find out what the giver paid for the home and whether the giver paid gift tax. After the sale, keep the closing statement and any Form 1099-S you receive.

For a closer look at how the federal home sale exclusion and basis fit together on a long-held home, read how capital gains work on a home you have owned for decades.

How Long to Hold on to Them

For the records that document a home's cost, IRS Publication 523 says that in general you keep them until 3 years after the due date of your tax return for the year you sold the home. For a home sold in 2027, the clock starts at the spring 2028 filing deadline. The IRS also advises checking whether an insurance company or a creditor needs a record longer before you discard it, and some tax situations call for a longer period too.

Your CPA can confirm the date that fits your situation, and whether a scanned copy is enough for any paper you plan to shred. Once you have the date, write it on the folder that holds the home records.

Ownership and Title Papers

Keep the deed from when you bought the home and, if you bought one, the owner's title insurance policy. The FTC says to keep the deed and mortgage papers for as long as you own the home. Ask a real estate attorney whether any other papers from the purchase should be stored with them.

If your home is held in a trust, keep the deed that placed it there along with the trust documents, and mention the trust to your closing attorney early. A title company may ask to see proof that the trustee has the authority to sell.

If the home may sit empty for a stretch during the move, protecting your home from deed theft describes a free Georgia alert that sends a notice when a filing matches your name or address.

Tax Returns and Supporting Papers

Keep copies of your past tax returns. The IRS says they help you prepare future returns, and they are also helpful to a survivor or to the person handling an estate. The FTC suggests keeping returns and the supporting documents behind them, such as canceled checks, receipts, W-2s, and 1099s, for at least three years, and the IRS may recommend longer for some tax records. The time limit depends on the situation, so your CPA can tell you how long to hold yours.

Mortgage statements and property tax records belong here too. The IRS says to keep them as proof of the property taxes you paid.

If you donate items as you downsize, keep your receipts. The IRS says to keep records that prove your gifts, and the kind of record depends on whether you gave money or items, or paid your own costs to make the donation. A written receipt from the charity is one of the basic records.

Investment Records

Investment papers deserve a place of their own. For stocks, bonds, and mutual funds, the IRS says your records should show what you paid, what you sold for, and any commissions, because those figures decide your profit or loss when you sell. Brokerage and mutual fund statements, and the yearly tax forms that come with them, belong here. The same idea applies to any real estate you own besides your home. The IRS says to keep records on property until its time limit for reviewing your return has passed for the year you sell it, so ask your CPA how long to hold yours.

Everyday Bills and Statements

Most day-to-day paper does not need to be kept longer than a year. The FTC puts bank statements, pay stubs, utility bills, credit card bills, deposited checks, and undisputed medical bills in that group. It suggests shredding the paper copies if you can see them online. Shred rather than toss anything with account numbers or other personal details.

There are a few exceptions. Anything that backs up a tax return goes with your tax papers. Receipts and warranty papers for big purchases you are keeping, such as appliances, and vehicle titles are worth holding for as long as you own the item. Your insurance company or a lender may also want certain records kept longer than the IRS does, so ask before you shred anything tied to a claim or a loan.

A Simple Way to Sort

Start with a few groups, then give each person or company its own folder inside them. The papers to keep for good get a folder for identification, one for legal papers, including any trust documents, one for retirement and pension records, and a health folder for each person in the household. Insurance gets a folder for each kind of policy, including life, health, long-term care, home, and car, with Social Security and Medicare papers as well. Your home records, such as the closing statements, the deed, the title policy, and the improvement invoices, get their own folder for your CPA, kept apart from the rest of your tax papers. Your tax returns, the supporting documents behind them, and your donation receipts go in another. Investments get a folder for each brokerage or kind of holding, such as stocks, bonds, mutual funds, and any real estate other than your home.

Everyday bills and statements get a folder for each company that sends them, such as the bank, the utility, and each credit card. The last folder holds anything you are unsure about, until your CPA or attorney weighs in.

That may sound like a lot of folders, but the papers that survive the sorting may fit in a banker's box or a single file drawer. Tell a trusted family member or friend where everything is kept. They do not need the details, only the location.

Planning the Move Around the Paperwork

Papers are only one part of a move. My complete guide to right-sizing in north metro Atlanta walks through deciding, planning, and moving.

If you would like the name of a CPA or a closing attorney to talk through your records, I am happy to connect you with one. I am also glad to discuss planning the timing of a listing around the time you need to sort.

Michelle Campbell | Campbell Group at Epique Realty | campbellgrouprealty.com