Although we’re living in the digital age, paperwork sits alive and well in many homes. At times, it can be difficult to differentiate what documentation to keep and what to toss. Most of us end up keeping everything just to be on the safe side. But don’t worry, sorting out your paperwork isn’t as difficult you might think. If you just bought a house or property, you’ll probably want to keep specific paperwork as a homeowner.
These three steps will help all homeowners to become well on their way to a cleaner, tidier, paper-free property. As for the documents you’ll be tossing during the spring clean, if you’re worried about anyone rifling through your trash bag and lifting your personal information, consider purchasing an inexpensive shredder.
Step 1: What paperwork should you keep?
This is probably the most confusing part of the task. What, exactly, do I need to keep and what can I toss? To make it easy, we’ve compiled a list of documents you absolutely must keep.
1. Property documents
All documentation pertaining to the purchase and sale of your home or rental property should be kept, including property reports, mortgage documents, statements of disbursements and price appraisals. Your annual mortgage statements should be kept for six years, but only if claim deductions based on a home-based business or work-at-home arrangements. If you don’t have these expenses, consider keeping the most-up-date annual mortgage statement. When you get next years you can toss this year’s, and so on.
2. Insurance documents
If the policy is still active, it’s important to keep all of the documents outlining what you’re covered for, the terms of the agreement and payment details. If the insurance is not active, it’s time to shred! If you already have a digital copy of the policy, there is no need to keep the paper copy. Your insurance company can provide a digital copy if you don’t have one. There is one exception: car insurance. It’s always to make note of the company and policy number for your vehicle insurance that way, you can prove to your next insurer there’s been no gaps in coverage (fail to prove this and you could see your premiums rise dramatically). This doesn’t mean keeping all your old car insurance documents, just keep a sheet with this information or hold on to your old pink slips, which list the insurance company and policy number on the slip.
3. Renovation receipts
Keep receipts of home improvements and major purchases. This information may be necessary if you make an insurance claim or if you claim capital cost allowance deductions (say on a secondary property).
4. Tax assessments
The Canada Revenue Agency (CRA) recommends keeping your tax records for at least six years, in case you’re selected for an audit. The six-year period starts at the end of the tax year to which the records relate. But not only should you keep the assessments, but also any supporting documents such as expense receipts, T4s showing income and tax deductions and receipts for donations and other deductions.
5. Other important paperwork to keep
Car records, birth certificates, death certificates, marriage certificate, divorce agreement, medical records, pension plan records and wills are all important documentation to keep in a safe place as a homeowner.
Step 2: What paperwork should you get rid of?
1. ATM withdrawal receipts and deposit slips
After you’ve checked the information against your account, you can shred these. All of this documentation can also be found on the internet if you currently use online banking.
2. Sales receipts for minor items purchased
Only keep receipts for major items purchased that are under warranty and for insurance claims.
3. Utility bills
Once you’ve paid the bill you can shred it. However, if you plan to use the bill for business deductions, you will need to keep it for six years. If you want to keep utility bills to compare and contrast rates, we recommend you switch to paperless bills that are emailed monthly and set up a folder in your email account to transfer bills into each month.
4. Credit card statements
If you still have statements that are over one year old, shred the documents. If you’ve bought items for your business and need them as supporting documentation come tax time, again, we recommend keeping those documents for six years.
Step 3: Where should I store my paperwork?
Money Coaches Canada suggests separating personal paperwork from tax documents to make it easier if you are ever audited. Tax documents should be kept in a file cabinet, box or envelope and labelled by year. Ensure the documents are stored somewhere that is both safe and dry. Digital copies of documents can be stored in a folder on your computer’s hard drive, but it’s also beneficial to make sure you have a backup copy, either on a memory stick or in the Cloud, in case your hard drive crashes.
Keeping on top of your home purchance and mortgage paperwork needn’t be a chore now you know what to keep and what to throw away. Remember to always go digital where you can, to save space and to stay organized.