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"How long do I have to keep this stuff?" is the usual question you ask yourself when feeling that you are running out of room for all this "paper" that may never be needed.   The paper receipt you get from your fast-food lunch may go directly into the trash.   The prudent consumer may keep it to reconcile it with their monthly statement and then, trash it.   The natural hierarchy with receipts and documents associated with purchases is that as the price or value goes up, the more important it is to keep them.   The question becomes "but for how long?" The following table will give you an indication on how long certain documents related to your home need to be kept according to best practices of tax professionals.   IRS recommends that records are kept for three years from the date the taxpayer files their original return or two years from the date the tax was paid, whichever is later.   There is no time limit in the case of fraud or failure to file a t...

There is a little-known provision in the tax code that allows homeowners to rent their principal  residence or second home for up to 14 days a year without having to recognize the income.   In this situation, the taxpayer does not deduct the rental expenses associated with the income. There is no restriction on how much you earn.   If your first or second home is in a desirable area where people are looking for short-term rentals, it could provide a windfall to the homeowner. In cities where any big sports championships are played, there could be a market for a temporary rental of a home.   Events like PGA tournaments, college basketball tournaments, Bowl games, NFL playoffs and others can create a demand for this type of rental. For instance, there are people in Augusta, Georgia who rent their homes during the Master's Golf Tournament each year.   There are not a lot of hotel rooms in the area relative to the number of people who usually attend in non-pan...

Before you pay cash for a home, ask yourself if there is a possibility, at some point in the future, you might put a mortgage on the home and would want to deduct the mortgage interest on your federal tax return. Current federal tax law allows homeowners to deduct the interest on up to $750,000 in acquisition debt used to buy, build or improve a property.   When a person pays cash for a home, the acquisition debt is zero.   The only way to increase the acquisition debt is to make and finance the improvements to the home. As with many IRS regulations, there are exceptions to this rule.   If a mortgage is secured on the first or second home within 90 days of the purchase closing, the debt is considered acquisition debt.   The interest on the funds used to purchase the home can be deducted on up to $750,000 of the mortgage balance. Assuming a borrower has good credit, the ability to repay the loan and the home justifies the loan, lenders are willing to make mortga...