LUNA CPA

How Long Should You Retain Financial Records?

Type of Document	Recommended Retention Period and Reason
Tax Returns Cancelled checks and receipts (e.g., alimony, charitable donations, mortgage interest, and retirement plan contributions) Supporting Documents for Deductions	Seven years The IRS has up to three years from the filing date to audit returns if errors are suspected. If you file an amended return to claim a refund, the three-year limit also applies. If your income was underreported by 25% or more, the IRS has six years to review your return. No time limit applies if a return was never filed or was filed fraudulently.
IRA Contribution Records	Permanently Records of nondeductible IRA contributions should be kept permanently to verify that tax has been paid on the contributions when withdrawals occur.
Retirement and Savings Plan Statements	From one year to permanently Retain quarterly 401(k) or similar plan statements until the annual summary arrives; discard the quarterlies if all is correct. Keep annual summaries until you retire or close the account.
Bank Statements	From one year to permanently Annually review your checks, keeping those linked to taxes, business expenses, home upgrades, and mortgage payments. Shred checks with no lasting significance.
Brokerage Account Statements	Until sale of the securities Retain purchase or sale confirmations for proof of capital gains or losses when filing taxes.
Utility Bills	From one year to permanently Review your bills annually. Typically, once a paid bill’s canceled check has been returned, you can discard the bill. However, bills for major purchases (e.g., appliances, antiques, vehicles) should be saved for insurance purposes to verify their value.
Credit Card Receipts and Statements	From 45 days to seven years Hold on to receipts until the monthly statement arrives; discard them if the amounts match. Retain statements for seven years if they include tax-relevant expenses.
Pay Stubs	One year After receiving your W-2, verify that it matches the information on your pay stubs. If they align, safely dispose of the stubs. If discrepancies exist, request a corrected W-2c form.
Real Estate Records	From six years to permanently Save records documenting the purchase price and costs of permanent improvements (e.g., renovations, additions). For six years after selling, retain records of selling-related expenses, such as legal fees and agent commissions. These records are vital for reducing capital gains tax when selling a home, as improvements and selling expenses increase the original purchase price or cost basis.