Important Documents Checklist: When to Toss Documents
Do you have important documents piling around your desk? You may think you need to keep them, but you can probably toss them. Here's your guide.
Despite the fact that most companies are trying to go the paperless route, many people still get paper bills. If you're one of these people, you're probably swimming in receipts, pay stubs, tax forms, and any other financial document out there.
It can be hard to know when to throw away important documents. What do you need to keep and what do you need to throw away?
Read on to take a look at our important documents checklist and when it's a safe bet to shred your documents.
If you use receipts for things you would like to itemize on your tax return, you need to hold onto them for at least three years. Store them with your tax records, and when those three years are up, shred them.
Home Improvement Records
Hold onto home improvement records for three years after the due date of the tax return that has the income or loss on the home when you sold it. If you plan to sell your home and you've improved it, keep receipts for those improvements for seven years. These will come in handy if you need to lower the taxable gain on your home when you sell it.
Keep all medical receipts for one year. Your insurance company could request proof that you visited your doctor and want to verify medical claims.
If you spend more than 10 percent of your adjusted gross income on your medical expenses, you can deduct them. If you use that deduction, keep the medical records for three years along with your tax records.
Pay stubs are necessary until the end of the year. Once you have compared them to your W-2 and your yearly Social Security statement, you can shred them.
If you are claiming your utility bills in a home office tax deduction, keep them for three years with your tax information. Otherwise, keep them for one year and then get rid of them.
Credit Card Statements
You should keep all of your credit card statements until you have confirmed all of the charges and have proof that you paid it.
And, like every other tax-related document, if you need that proof for your tax deductions, hold them for three years before you shred them.
Investment and Real Estate Records
You might need these documents for your capital gains tax, so keep them for three years in case you're audited. These records track your cost basis and track the taxes that you owe when you sell properties or stocks.
Once you have the annual summary, shred the monthlies.
Keep bank statements for three years, in case of an audit. But if your bank offers online statements, consider switching to cut down on paper and storage.
The IRS says that you should keep these records for three years from the date you filed the return or two years after you paid the tax. If in doubt, go with the later number.
If you file a claim for a loss, keep your records for seven years.
The Keep Forever Important Documents Checklist
Here is a list of the things you should never get rid of:
- Marriage license
- Birth certificates
- Adoption papers
- Death certificates
- Records of paid mortgages
And if you're ever in doubt of whether or not you should keep something, it's a good idea to err on the side of caution than to throw something out that will be important some day.
The Bottom Line
This list might be just some of the items on your important documents checklist because everyone's financial life is unique to them. A good rule of thumb, if you're ever unsure, is to keep things for seven years before you make an effort to get rid of them. Also, you should never just throw away these financial documents, make sure that you shred them completely to prevent fraud and theft.
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