Can You Throw Away Receipts? What to Keep and For How Long

Receipts document financial transactions, confirming payment for goods or services. They detail the date, items, and total amount of a purchase. This documentation establishes a paper trail for financial activities, forming a basis for personal financial management and consumer protection.

Why Receipts Matter

Keeping receipts is important for managing personal finances. Receipts provide proof of purchase, often needed for returns, exchanges, or warranty claims. Many retailers require a receipt to process a return, and product warranties typically rely on proof of purchase.

Receipts are valuable tools for budgeting and tracking expenses. By reviewing receipts, individuals can understand where their money is being spent, helping them identify areas for potential savings or adjust spending habits. This record-keeping supports financial planning.

For tax purposes, receipts serve as documentation for deductions, credits, or to substantiate income and expenses. The Internal Revenue Service (IRS) requires taxpayers to keep records to support items reported on their tax returns. In the event of a billing error or fraud, receipts act as evidence to resolve disputes with merchants or financial institutions.

Identifying Key Receipts to Retain

Certain receipts hold importance and should be retained. Tax-related receipts are significant, as they substantiate deductions for medical expenses, charitable contributions, or business expenses for self-employed individuals. These documents are essential for preparing income tax returns and for responding to inquiries from tax authorities.

Receipts for major purchases (e.g., appliances, electronics, furniture) should be kept for warranty purposes, insurance claims, or potential resale. These items often come with manufacturer warranties that require proof of purchase for service. Home improvement receipts are important, especially for renovations that might affect a property’s cost basis, relevant for calculating capital gains when the property is sold.

Investment-related receipts (e.g., for stocks or mutual funds) establish cost basis and transaction details. Medical and healthcare receipts are necessary for insurance claims, FSA or HSA reimbursements, and tax deductions if medical expenses exceed a certain percentage of adjusted gross income. Receipts for returns or exchanges should be kept until the transaction is settled.

How Long to Keep Receipts

The duration for retaining receipts varies based on their purpose. For tax-related receipts, the IRS statute of limitations is typically three years from filing or two years from tax payment, whichever is later. For substantial underreporting of income, the period extends to six years. Receipts for assets (e.g., a home or investments) should be kept indefinitely, or until several years after the asset is sold, to determine the cost basis for capital gains calculations.

Receipts for major purchases and items with warranties should be kept for the warranty period. Some products may have extended warranties or expected lifespans that exceed the initial warranty, making it prudent to retain these receipts longer. For home improvement receipts, keep them as long as you own the property, plus the relevant tax retention period after the sale. This ensures documentation to adjust your home’s cost basis, which can reduce taxable capital gains.

Medical receipts should be kept for at least three years, aligning with the tax statute of limitations, especially if you plan to deduct medical expenses. They are also necessary for submitting insurance claims, which have filing deadlines. General household and budgeting receipts (e.g., groceries) can be discarded once they have been reconciled with bank or credit card statements, typically within 30 to 60 days. This practice helps confirm that all transactions are accurate and accounted for.

Organizing and Storing Receipts

Effective organization and storage of receipts simplify financial management and ensure documents are accessible. For physical receipts, a simple filing system can be effective. This might involve using accordion folders, binders with labeled dividers, or categorized envelopes. Labeling files by month, category, or tax year helps in quick retrieval.

Digital storage offers a convenient alternative to physical paper. Scanning physical receipts using a mobile app or a home scanner allows for digital copies. Many financial apps and cloud storage services support receipt capture and organization. Digital receipts received via email should be saved in dedicated folders or transferred to a cloud storage system.

Regardless of whether you choose physical or digital methods, consistency is important. Establish a routine for processing and filing receipts regularly to prevent accumulation. Regularly back up digital records to an external hard drive or a secure cloud service to protect against data loss. Periodically review your stored receipts to discard those no longer needed, following retention guidelines.