How Long Do I Need to Keep Receipts for Taxes?

Keeping accurate records is a fundamental practice for managing personal finances and fulfilling tax obligations. These records serve as the primary evidence supporting the income, deductions, and credits reported on tax returns. Understanding how long to retain these documents is important for compliance and can prevent potential issues during an audit.

General Rule for Tax Record Retention

The most common guideline for retaining tax records is to keep them for three years from the date you filed your original tax return. This period aligns with the Internal Revenue Service’s (IRS) statute of limitations for assessing additional tax. If you filed your return before the April 15th due date, the three-year period typically begins on April 15th of that year.

For instance, if you filed your 2024 tax return on March 1, 2025, you should keep all supporting documents for that tax year until at least April 15, 2028. It is advisable to keep records for three years from the later of the filing date or the due date of the return.

Specific Situations Requiring Longer Retention

While the three-year rule covers many tax situations, certain circumstances require holding onto records for extended periods. If you omit more than 25% of your gross income from your tax return, the IRS has six years to assess additional tax.

For claims of a loss from worthless securities or a deduction for bad debt, you must retain records for seven years.

Records related to the basis of property, such as your home or investments, require indefinite retention. These documents include purchase agreements, closing statements, records of improvements, and sales documents. You need these records to calculate the correct gain or loss when you sell the property, even if the sale occurs many years after the purchase. You should keep these records for at least three years after you sell the property and report the transaction on your tax return.

Employers must keep all employment tax records for at least four years after the date the tax becomes due or is paid, whichever is later. This includes records related to wages, tips, and other compensation paid to employees, as well as income tax withholding and FICA taxes. Additionally, if you made nondeductible contributions to an Individual Retirement Arrangement (IRA), you should keep Form 8606, Nondeductible IRAs, indefinitely. This form tracks your basis in the IRA, which is crucial for determining the taxable portion of future distributions.

Essential Records and Their Purpose

Understanding which records are important for tax purposes is as important as knowing how long to keep them. Income records are fundamental for accurately reporting all earnings. This includes documents such as Form W-2, Wage and Tax Statement, from employers, and various Forms 1099, like 1099-NEC for nonemployee compensation, 1099-INT for interest income, and 1099-DIV for dividends. Schedule K-1s from partnerships or S corporations also fall into this category, detailing your share of income, losses, and deductions.

Expense receipts and invoices are necessary to substantiate deductions and credits claimed on your tax return. This encompasses receipts for medical expenses, charitable contributions, business-related costs, and educational expenses. Without proper documentation, the IRS may disallow these deductions, leading to additional tax liability.

Bank and credit card statements are useful for cross-referencing income and expense transactions. While not always primary documentation, they can help verify dates and amounts, and serve as a secondary source of information. These statements can be particularly helpful in reconstructing lost receipts or verifying the flow of funds related to reported items.

Brokerage statements are essential for tracking investment income, capital gains and losses, and the basis of securities. These statements provide details on purchases, sales, dividends, and interest from investments. Records related to home ownership, such as mortgage interest statements (Form 1098) and property tax bills, are important for claiming potential deductions. Documents for significant purchases or sales, like vehicles or other large assets, are also necessary for calculating any gain or loss.

Acceptable Record-Keeping Methods

The IRS accepts tax records in various formats, providing flexibility for taxpayers. Both physical paper records and electronic versions are considered valid for tax purposes. The primary requirement is that the records are accurate, complete, and clearly legible.

For electronic records, this means scanned documents, digital files, and records generated by tax software are acceptable. They must be maintained in a way that ensures their integrity and accessibility, including being backed up and easily retrievable.

When keeping physical records, organize them systematically for easy retrieval. Storing them in a safe place, such as a fireproof safe or secure filing cabinet, protects them from damage or loss. Regardless of the method, the records must be readily available if the IRS requests them.