7 Tax Documents You’ll Probably Regret Throwing Away

Many of us embark on a decluttering binge when it comes to the new year. We’ve all been there, desktops and drawers overflowing with dated paperwork. It feels like a smart reset move — out with the old, in with the new — as we focus on new goals to build wealth and wellness.

While clearing the clutter in your life can help, when it comes to tax documents, that’s not such a smart move. Tax documents aren’t just your tax returns; they are an arsenal of financial records and your defense in the event of future audits, lawsuits, or other disputes. These documents are too valuable to let go of.

To avoid regret, here’s what you should keep and why.

Hang on to your old tax returns — even if you’ve already got your return or the taxman cashed your check. Old tax returns are essential for resolving any discrepancies or future filings, and they can come in handy when applying for loans, mortgages, or even the U.S. presidency.

While the IRS recommends keeping these records for at least three years, the government can audit a past return for any filing year, although they “usually don’t go back more than the last six years.”

This wishy-washy promise means it’s probably safer to hold onto old tax returns forever.

These forms for job wages are vital for reporting and proving your income. It’s best to hold onto these documents for at least three years. These records are especially critical for substantiating your earnings if you're self-employed.

Whether it’s a hospital bill or a chair for your home office, you need receipts as proof of tax-deductible purchases made. Losing a receipt could mean missing out on a big tax deduction or getting dinged with a penalty during an audit.

It’s best to hold onto these documents for at least three years or longer if they relate to property you still own.

Track all contributions to your 401(K), IRA, or other retirement savings vehicles. These documents ensure you get the tax breaks you’re entitled to for plan contributions and prove you adhered to all plan contribution limits.

Additionally, these documents distinguish between Roth and non-Roth contributions, helping to clarify what is and is not taxable when funds are distributed during retirement.

Homeownership can offer significant tax breaks, such as deductions for mortgage interest, property taxes, and depreciation.

Hold onto the deed, mortgage documents, property taxes, and other related documents for the entire time you own your property — plus an additional three years after filing the tax return that reports the property’s sale.

It's also important to keep investment records. These forms — such as earnings statements, quarterly reports, or trade confirmations — prove the purchase price for stocks and other portfolio assets, ensuring you don’t overpay taxes when selling.

While brokers provide cost-basis information for certain securities, it’s always good practice to retain your records — especially if you’ve switched or may switch firms. Keep these documents for at least three years after the sale of any asset.

FINRA recommends that you hold investment sales records and other tax-related forms for up to seven years.

Inheriting a house, stock, or other property from a deceased loved one often comes with tax implications. Complicated rules are at play for determining your tax basis and the asset's value at the original owner’s death date.

To avoid a tax mishap, holding onto all documents related to the inheritance, appraisal, or sale of any inherited assets is important. It’s generally recommended to hold onto these documents for as long as you own the property, plus an additional three years after reporting the sale.

No one likes clinging to old paperwork, let alone storing it in a secure and organized filing system. While not glamorous, it’s smart money advice. These records can help you maximize filings, resolve disputes, handle audits, and secure mortgages or other loans.

A good start is to organize your files, scan them, and save them to the cloud or your hard drive. While scanned documents are widely accepted, if not preferred, the original paper version is still required in some instances.

Scanning documents and having multiple backup copies does help prevent form loss, but it doesn’t necessarily make it easier to find them when needed. You still need to put thought and care into naming, organizing, and storing files.