How Long Should I Retain Records?
Keep records as long as appropriate
Different records need to be saved for different periods of time. Divide your records into categories, such as short-term, medium-term, and long-term. There are no concrete rules about how long records must be saved, so you will often have to use your own judgment. The following guidelines may help:
Short-term (1-3 years)
- Household bills, except those that support tax deductions (items such as heat, water, and electricity are generally short-term unless you deduct them for home office use or a rental)
- Expired insurance policies
Medium-term (6-7 years)
- Tax returns and supporting information
- Income and expense records (including lottery tickets and winnings)
- Bank and credit union statements
- Brokerage house statements
- Canceled checks and check registers (checks for major purchases may be kept longer)
- Paid-off loan documents
- Personal property sales receipts
- Tax dispute records
- Evidence of retirement plan contributions
- Investment records
- Medical history information
- Pension/retirement plan documents
- Social Security information
Other (as noted)
- Home ownership/sale documents: 7 years after sale or indefinitely
- Home improvement records: 7 years after sale
Caution: The IRS typically has three years after a return is filed to audit a return, or two years after you’ve paid the tax, whichever is later. However, if income was underreported by at least 25 percent, the IRS can look back six years after the return is filed, and there is no time limit for fraudulent tax returns. An audit requires that you provide documentation to substantiate the return being audited.
Tip: Canceled checks do not necessarily prove why a given payment was made, only that the payment was made. Having dated receipts, invoices, sales slips, credit card statements, and bank statements can provide valuable proof if needed, whether for an IRS auditor or an insurance claims adjuster.
Save space: Annually review retained records and discard those no longer needed
Some records and documents can be discarded after all potential usefulness has passed. Depending on circumstances, records can accumulate quickly and require extensive storage space. Discarding records that are no longer necessary saves space and makes finding a record you need easier.
Tip: Expired product warranties and insurance policies are excellent candidates for the trash can.
Tip: For easier future access, retain records for each year in separate files.
Caution: Keep your important records and financial files separate from information you might want to retain for other purposes. If you clip articles, jot notes, and save information you receive on items of potential interest, create a separate set of information files for them. These might contain vacation ideas, recipes, home improvement items, personal letters, or the kids’ school papers. Keeping them apart from vital records and financial files makes both easier to find and manage.