Earn / Taxes

When to Keep and When to Throw Away Financial Documents

Nancy Mann Jackson  |  July 11, 2018

Some financial documents need to be kept, but others can be shredded and tossed. Here’s a guide on what to keep and for how long.

If you haven’t already opted to go paperless, you might be swimming in a flood of receipts, bills, pay stubs, tax forms and other financial documents. But it doesn’t have to be that way (you can go paperless!). Some of those papers you have collected need to be kept, but others can be shredded and tossed.

Here’s a guide of which financial documents to keep and for how long.

Receipts

Receipts for anything you might itemize on your tax return should be kept for three years with your tax records.

Home Improvement Records

Hold these for at least three years after the due date of the tax return that includes the income or loss on the home when it’s sold. If you plan to sell the house, and you have made improvements to it, keep receipts for those improvements for seven years — you may need them to lower the taxable gain on the house when you sell it.

Medical Bills

Keep receipts for medical expenses for one year, as your insurance company may request proof of a doctor visit or other verification of medical claims. If your medical expenses total more than 7.5 percent of your adjusted gross income for 2017 or 2018, you can deduct them. If you plan to take that deduction, you’ll need to keep the medical records for three years for tax records.

Paycheck Stubs

Keep pay check stubs until the end of the year, and discard them after comparing to your W-2 and annual Social Security statements.

Utility Bills

Keep for one year and then discard — unless you’re claiming a home office tax deduction, in which case you must keep them for three years.

Credit Card Statements

Keep until you’ve confirmed the charges and have proof of payment. If you need them for tax deductions, keep for three years.

Investment and Real Estate Records

Keep for three years, as you may need the documentation for the capital gains tax if you’re audited by the IRS. These records help track your cost basis and the taxes you owe when you sell stocks or properties. Once you receive the annual summaries, you can shred your monthly statements.

Bank Statements

You’ll need bank statements for up to three years if you are audited by the IRS. If your bank provides online statements, you can switch to receiving your bank documents online and cut down on paper.

Tax Returns

The IRS recommends that you “keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.” If you file a claim for a loss from worthless securities or bad debt deduction, keep your tax records for seven years.

Records of Loans that Have Been Paid Off

Keep for seven years.

Active Contracts, Insurance Documents, Property Records or Stock Certificates

Keep all these items while they’re active. After contracts are completed or insurance policies expire, you can discard these documents.

Marriage License, Birth Certificates, Wills, Adoption Papers, Death Certificates or Records of Paid Mortgages

Keep these documents forever.


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