Keep HUD-1 papers, even when home is paid off
By Benny Kass
Q: We have owned our home since 1998 and have refinanced twice since that time. I still have the original mortgage papers along with both sets of papers for the refinances. I am afraid to throw anything out, but they are quite bulky and take up a lot of room. Do I really need to keep all three, or can I toss the original papers from when we bought the home and the first refinance papers and just keep the most recent set of papers?
A: So long as you are absolutely sure that the two earlier mortgages have been paid in full and appropriate releases recorded among the land records where your property is located, you can toss those old loan documents. However, one document that you should keep until you sell your very last house is the HUD-1 (settlement statement). You should keep every HUD-1. This document shows what the property cost, what your closing costs were, and any other costs - some of which can be added to your basis for tax benefits.
You should also keep all records of any home improvements. Improvements help in increasing your tax basis. And while you may be eligible for the up-to-$500,000 exclusion of gain (for married couples who file a joint tax return), you may have made more than $500,000. Thus, for every dollar that you can add to your tax basis, you save 15 cents on your federal tax return plus any applicable state income tax.
Benny Kass is a practicing attorney in Washington, D.C., and Maryland. Questions for this column can be submitted to benny@inman.com. Distributed by Inman News.
Source: SF Gate