How Long Should You Keep Your Tax Documents?

Keeping tax documents organized and accessible is essential for accurate record-keeping and for meeting IRS guidelines. Here’s a breakdown of how long you should hold onto different types of documents to stay compliant and protect yourself in case of an audit.

General Rule of Thumb

Our firm recommends keeping your tax documents for seven years in most cases.

Detailed Guidelines by Document Type

  1. Tax Returns and Supporting Documents

    • Keep for: 3 Years

    • Why: Most audits occur within three years of filing, so holding onto these documents is essential for reference.

  2. Employment and Income Records (W-2s, 1099s, etc.)

    • Keep for: 3 Years

    • Why: These documents help verify income and are needed if the IRS questions your earnings or deductions.

  3. Property Records (Real Estate, Stocks, Bonds, etc.)

    • Keep for: At least 3 Years after Sale

    • Why: Keep these for as long as you own the property, plus three years after selling, to document capital gains or losses.

  4. Home Improvement Records

    • Keep for: Until You Sell the Property + 3 Years

    • Why: Records of home improvements are needed to calculate capital gains or losses when you sell.

  5. Retirement and Investment Account Statements

    • Keep for: Until Withdrawn + 3 Years

    • Why: These help prove any contributions or distributions and may impact your taxable income.

  6. Medical and Business Expense Records

    • Keep for: 3 Years

    • Why: Medical and business expenses may be deducted, so keeping these records verifies the claims.

Special Circumstances

  • Claiming a Loss: If you claim a loss due to bad debt or worthless securities, keep records for 7 years.

  • Underreporting Income (More than 25%): If the IRS suspects you underreported income by over 25%, keep documents for 6 years.

  • Fraudulent Returns or No Filing: In cases of suspected fraud or if you didn’t file a return, there’s no time limit—retain records indefinitely.

Digital Storage for Tax Documents

The IRS accepts electronic records as long as they’re legible and accessible. Scanning and saving documents digitally can help with organization, providing security and easy access.

Safely Disposing of Old Tax Documents

Once your paper documents are no longer needed, shred them to protect your personal information. Towns, libraries, and AARP often offer free secure shredding. Never donate, sell, or dispose of old technology without permanently deleting your personal information.