For most tax deductions, you need to keep receipts and documents for at least 3 years.
Unless you live in a Hollywood Hills mansion, you probably don’t have space to store years of tax and insurance paperwork, warranties, and repair receipts related to your home. And if you’re keeping digital records, you likely don’t want to keep adding new records every year without a plan for managing the old records.
The paperwork or digital records will help you if you need to prove you qualify for the tax deductions you took, to file an insurance claim, or to figure out if your busted oven is still under warranty.
To help you wrangle those records, here’s a handy checklist of how long to keep tax records.
Tax Recordkeeping Insights from the IRS
For recordkeeping, align with IRS guidance and all tax record rules.
IRS Tax Return Requirements
Consider this background information on IRS rules on how long to keep tax records, which informed some of our charts:
- At least three years. In most cases, the IRS says you should keep tax returns and the paperwork supporting them for at least three years after you file the return — the length of time the IRS has to audit you. So that’s how long we advise. Under some circumstances, however, you should keep them longer.
- Varies by state. Check with your state about state income tax returns. Most states make you keep them as long as the federal government does — three years in most cases. But Montana wants you to keep them for five years. And Ohio recommends you hang on to them 10 years. Yes, an entire decade.
- Up to six years. The IRS can also ask for records up to six years after a filing if they suspect someone failed to report 25% or more of their gross income on their income tax returns. And the agency never closes the door on an audit if it suspects fraud. Just sayin’.
How Long to Keep Each Category of Tax Documents
Here are some guidelines for how long to keep tax records based on record type.
Keep Home Sales Records for as Long as You Own the Property + 3 Years
| HOME SALE RECORDS | |
| Document | How Long to Keep It |
| Home sale closing documents, including closing statement | As long as you own the property + 3 years |
| Deed to the house | As long as you own the property |
| Builder’s warranty or service contract for new home | Until the warranty period ends |
| Community/condo association covenants, codes, restrictions (CC&Rs) | As long as you own the property |
| Receipts for capital improvements | As long as you own the property + 3 years |
| Mortgage payoff statements (certificate of satisfaction or lien release) | Forever, just in case a lender says, “Hey, you still owe us money.” |
Why you need these docs: You use home sale closing documents and receipts for capital improvements records to calculate and document your profit (gain) when you sell your home.
Your deed and mortgage payoff statements prove you own your home and have paid off your mortgage, respectively.
Your builder’s warranty or contract is important if you file a claim. And sooner or later you’ll need to check the CC&R rules in your condo or community association.
Keep Annual Tax Deductions for 2-3 Years
| ANNUAL TAX DEDUCTIONS* | |
| Document | How Long to Keep It |
| Property tax payment (tax bill + canceled check or bank statement showing check was cashed) | 3 years after the due date of the return showing the deduction |
| Year-end mortgage statements | 3 years after the due date of the return showing the deduction |
| Tax returns | 3 years from the date you file your return or 2 years from the date you paid the tax, whichever is later |
Why you need these docs: To document you’re eligible for a deduction or tax credit in case you’re audited by the IRS.
*These deductions are relevant if you itemize. The standard deduction has been increased, which means fewer people will itemize than have in the past.
Keep Insurance and Warranties Until They Expire
| INSURANCE AND WARRANTIES | |
| Document | How Long to Keep It |
| Home repair receipts | Until warranty expires |
| Inventory of household possessions | Forever (remember to make updates) |
| Homeowners insurance policies | Until you receive the next year’s policy |
| Service contracts and warranties | As long as you have the item being warrantied |
Why you need these docs: To file a claim or see what your policy or warranty covers.
Keep Investment Real Estate Deductions as Long as You Own the Property + 3 Years
| INVESTMENT (LANDLORD) REAL ESTATE DEDUCTIONS | |
| Document | How Long to Keep It |
| Appraisal or valuation used to calculate depreciation | As long as you own the property + 3 years |
| Receipts for capital expenses, such as an addition or improvements | As long as you own the property + 3 years |
| Receipts for repairs and other expenses | 3 years after the due date of the return showing the deduction |
| Landlord’s insurance payment receipt (canceled check or bank statement showing check was cashed) | 3 years after the due date showing the deduction |
| Landlord’s insurance policy | Until you receive the next year’s policy |
| Partnership or LLC agreements for real estate investments | As long as the partnership or LLC exists |
| Section 1031 (like-kind exchange) sale records for both your old and new properties, including HUD-1 settlement sheet | As long as you own the new property + 3 years |
Why you need these docs: For the most part, to prove your eligibility to deduct the expense. You’ll also need receipts for capital expenditures to calculate your profit (gain) or loss when you sell the property. Landlord’s insurance and partnership agreements are important references.
Keep Miscellaneous Records 3-4 Years
| MISCELLANEOUS RECORDS | |
| Document | How Long to Keep It |
| Wills and property trusts | Until updated |
| Date-of-death home value record for inherited home, and any rules for heirs’ use of home | As long as you or your spouse owns the home + 3 years |
| Original owners’ purchase documents (sales contract, deed) for home given to you as a gift | As long as you or your spouse owns the home + 3 years |
| Divorce decree with home sale clause | As long as you or your spouse owns the home + 3 years |
| Employment records for live-in help (W-2s, W-4s, pay and benefits statements) | 4 years after you make (or owe) payroll tax payments |
Why you need these docs: Most are needed to calculate capital gains when you sell. Employment records help prove deductions.
3 Ways to Organize Your Tax Records and Receipts
Keeping your tax documents well organized is key. Then you’ll easily be able to access any records if you need them.
If you haven’t already switched to digital recordkeeping, consider scanning and digitally storing paper documents, such as receipts, which fade with time and take up space. Even better, save your documents to at least two digital locations.
Digital copies are OK with the IRS as long as they’re identical to the originals and contain all the accurate information that was in the original receipts. You must be able to produce a hard copy if the IRS asks for one.
Here are three practical ways to store IRS paperwork digitally and get rid of the paper.
#1 Computer Hardware
Flash drives or external hard drives are designed to store documents and other data. Flash drives are portable and tend to be smaller than external hard drives, so they’re easy to store. External hard drives usually have a larger memory capacity and are more durable than flash drives. Both can be used to store tax returns and other IRS documents safely.
#2 Cloud-Based Software
Unlike storing your tax data to a physical device, like a flash drive, a cloud-based remote server offers similar storage capabilities to a virtual server. This means you don’t have to keep track of the device itself. Instead, you can access your tax records remotely through a cloud computing platform.
#3 Apps
Another digital data storage option is to use apps, such as Smart Receipts, which is available via Google Play and Mac App Store. Smart Receipts lets you track your finances, including receipts, for yourself or your employer. You can choose from default data types including dates, price, tax, receipt categories, comments, and payment methods.
What’s the Best Way to Get Rid of Outdated Tax Documents?
When you do finally toss out your home-related paperwork, use a shredder. Throwing away intact or manually torn documents that include personal financial information could put you at risk for identity theft.
Tax season and year’s end are good times to purge files and toss what you no longer need. That’s often when the spirit of organization moves us.
This article provides general information about tax laws and consequences, but isn’t intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.
I read this article HERE. By: Dona DeZube
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