How Long Should You Keep Your Tax Records?

When it comes to saving old returns and supporting documents, many people are unsure how long to keep their tax records. While the IRS provides specific rules depending on the situation, we believe in keeping things simple.

Our General Recommendation:

• Keep copies of your tax returns forever. These serve as a valuable financial history and may be helpful in the future for things like loan applications, future tax planning, or even Social Security benefits.
• Keep most supporting documents for 7 years. This includes W-2s, 1099s, receipts, charitable contribution records, and other documentation used to prepare your return. Although the IRS typically allows you to discard most items after 3 years (the usual statute of limitations for audits), we recommend holding onto them for 7 years to be safe and simplify your recordkeeping strategy.
• Keep cost basis documentation for assets (like investments or real estate) for at least 7 years after the asset has been sold. Depending on the size of the gain when realized relative to your other income, you may need this information to prove your cost basis if the IRS were to question it.

Feel free to convert your tax records into a digital format. Doing so saves space, minimizes the risk of loss due, and is far safer from identity theft.

Why 7 Years? 

The IRS guidance is more nuanced than most people realize. While some documents can technically be shredded after 3 years, exceptions exist that can extend the IRS’s ability to review your returns to 6 years—or indefinitely in cases of fraud. Rather than keeping track of all the variables, we suggest following the 7-year rule for simplicity and peace of mind.