How Long Should You Keep Tax Records?
Once you’ve filed your tax return, what should you do with all the forms, receipts, canceled checks, and other records scattered across your desk? Do you need to keep them, or can you shred them now? The answer depends on the type of record, so here’s a general rundown on how long you should keep certain common tax records and documents.
Records to Keep for 1 Year:
- Pay stubs (keep them until you check them against your W-2s)
- Monthly brokerage statements (shred them if they match up with your year-end statements and 1099s)
Records to Keep for 3 Years:
- Documents that support any income, deductions, and credits claimed on your tax return, including:
- Form W-2s reporting income
- Form 1099s showing income, capital gains, dividends, and interest on investments
- Form 1098 if you deducted mortgage interest
- Canceled checks and receipts for charitable contributions
- Records showing eligible expenses for withdrawals from health savings accounts and 529 college-savings plans
- Records showing contributions to a tax-deductible retirement-savings plan, such as a traditional IRA
- If you no longer itemize deductions on Schedule A, you might not need to keep as many documents
Records to Keep for 6 Years:
- 1099s, receipts, and other records of business expenses for self-employed people
- The IRS has up to six years to initiate an audit if you’ve neglected to report at least 25% of your income
Records to Keep for 7 Years:
- Records related to bad debts or worthless securities to claim a deduction or loss
Records to Keep for 10 Years:
- Records or documents related to foreign taxes paid, in case you want to claim a credit or deduction on your U.S. tax return
Investments and Property:
- Keep some records for at least 3 years after you sell, including:
- Contributions to a Roth IRA
- Investing records showing purchases in a taxable account
- Home-purchase documents and receipts for home improvements
- If you inherit property or receive it as a gift, keep documents and records that help you establish the property’s basis for at least 3 years after you dispose of the property
Remember, these are general guidelines, and some situations may require you to keep records for longer periods. Additionally, you may want to keep certain documents around for non-tax purposes. For example, it might be wise to save W-2 forms until you start receiving Social Security benefits so you can verify your income if there’s a problem. It’s also a good idea to hold onto copies of your tax return itself indefinitely.