It’s tax season, which is always a great time to clean out and organize your financial records. One of the main things people are always asking is how long they should keep their financial records.
Let’s break it down by each category of financial records:
Current Files (Files that are active for the current year)
Manuals & Warranties
If you have manuals and warranties for items in your homes, you likely don’t need to keep them if you know how to use the item. If there’s a manual for something that would stay with your house, such as the fridge, hot water heater, air conditioner, etc, then you could keep it for the next homeowner.
But, most manuals are available online now, and you can download the PDF version and save it on your computer. This is a good project for your kids this summer — kidding, but not really.
If you decide to keep a paper copy of manual, just remember to go through it periodically and get rid of the items you no longer own.
Bank & Credit Card Statements
I suggest keeping your bank and credit card statements as support for your taxes. Keep them for the current year, then move then with your tax documents in case of an audit.
You don’t have to keep your bank and credit card statements, but they can serve as a helpful snapshot of your transactions.
If you still get paper pay stubs, keep them until you receive you W-2 for that job. The numbers from your last paystub of the year should match your W-2. If they do, you can shred your pay stubs.
According to the IRS, once a household bill (like electricity or water) is paid and clears your bank account, it can be shredded or recycled). The only exception is if you have a home office. Then a portion of these bills can be written off, so you would keep the bills to support your taxes.
Keep your medical records indefinitely — these provide a picture of your health. Records include things like lab reports, surgery records, and medical test results.
As far as medical bills and receipts, most of the time these aren’t written off on your taxes, but it’s a good idea to keep the receipts for the year, just in case. Once a new year starts, if you’re not planning on writing them off, you can shred them. If you wrote off medical expenses on your taxes, keep the receipts to support your taxes.
If you have a Health Savings Account that requires you to show proof of purchases, you’d want to keep receipts for those items, too.
As for insurance policies, just keep your current policy documents on-hand. Of course, if you’re dealing with an issue regarding your previous insurance policy, then keep it.
In Louisiana, the Louisiana Fair Plan Assessment from your homeowner’s policy is something you can write off on your state taxes. If you write this line item off, you would want to keep your old policy with your tax documents to support your taxes.
If you get investment statements, you can keep the monthly paperwork until you receive the annual statement. Then, shred the monthly statements.
Tax Documents for Current Year
This could be bank statements, credit card statements, 1099s, W-2s, donations, year-end statements from your investments, and any document that arrives in an envelope labels “Important Tax Documents Enclosed.” Only keep receipts that are for items you wrote off on your taxes, such as donations, education supplies, etc.
If you have a loan, keep the documents and move it to your tax folder at the end of the year. Once a loan is paid off, you’ll get a letter confirming it’s paid off. Keep this one indefinitely, just in case.
Home Improvement Receipts
The other set of receipts that are worth keeping is any large home improvement efforts you’ve made. If it’s something future homeowners or a realtor would want to know about, keep the receipt. Examples are new air conditioner, hot water heater, or roof or any additions or renovations to your home.
Other receipts you might consider keeping are those for big-ticket items such as furniture, artwork, jewelry, and technology. If something happens to these items, you have a record of when you bought it and how much it costs for insurance purposes.
If you often end up with a pile of receipts, you might consider having a place to keep them throughout the year, such as a designated file folder.
Reference Files (Files that aren’t active, but need to be kept for reference or legal purposes)
Your reference files are ones that may not necessarily be tied to your current situation, but you still need to keep them.
These are your:
- Real estate documents (indefinitely)
- Tax returns (keep 1040 forms indefinitely)
- Any documents that support your tax returns, such as bank statements, 1099s, W-2s, etc.
Vital Records (Important documents you would need to grab in an emergency)
For more information on vital records you should keep in case of an emergency and how to organize those, take a look at our blog post on Organizing Your Vital Documents.
For a general cheat sheet for all of your records, take a look at our list.