Keeping tax paperwork is not busywork—it’s financial protection. Returns, proofs of filing, and cost-basis records protect you in audits, reduce taxes on sales, and settle inheritance questions.

A simple retention system can mean fewer headaches now and real savings later when you sell a home, unload investments, or answer a notice.

Why Keep

Tax records do three jobs: verify that you filed, substantiate what you claimed, and establish your cost basis when you sell assets. Without them, you may pay more tax than necessary or lose disputes because the burden of proof typically rests on the taxpayer.

Audit Window

A common audit window is three years from the date a return is filed (local rules can extend this in certain cases). “You should keep tax returns and supporting documents for at least three years after you file them,” states Logan Allec, a certified public accountant.

Build your retention plan around that baseline, then add buffers for complex items.

Prove Filing

Always keep a full copy of each return plus proof it was filed.

• Paper filers: save certified-mail receipts or a private-carrier shipping slip.

• E-filers: save the acceptance notice from your software or preparer.

Do the same for any regional return (if applicable). These documents are your first line of defense if a notice claims “no return on file.”

Home Records

For many households, a residence is the largest asset—and a big tax variable at sale. While gains from a principal residence can be excluded up to set limits when eligibility rules are met, basis still matters. The higher your basis, the lower your taxable gain if the exclusion does not apply or the gain exceeds the cap.

Improve Basis

Keep everything that proves what you paid and what you improved. Save the closing/settlement statement and receipts for: title insurance, legal and recording fees, transfer taxes, surveys, utility hookups, and similar acquisition costs. Continue the folder with capital improvements—additions, new roof, systems, windows, major landscaping, and built-ins. Maintenance doesn’t increase basis; permanent improvements do.

How Long

Retain home purchase and improvement records for as long as you own the property, then at least three years after the return that reports the sale. This timing aligns with the typical period the tax authority can question your calculation.

Other Property

The same basis rules apply to stocks, mutual funds, ETFs, rental or vacation homes, collectibles, and similar assets. Keep trade confirms, fee disclosures, and statements that show purchase dates and costs. If you reinvest dividends, save records showing those reinvested amounts—they increase basis and reduce future gains.

Broker Reports

Many brokers track and report cost basis for “covered” securities, but data can be lost when you transfer accounts, firms merge, or securities predate coverage rules. Maintain your own archive anyway. For asset classes not comprehensively tracked by intermediaries, your personal records may be the only source.

Inherited Assets

Inherited property typically receives a basis equal to fair market value on the date of death (or an alternate valuation date if used). Save what establishes that value: estate accountings, appraisals for real property, and historical pricing for publicly traded securities. If an estate-tax return (if required) was filed, keep a copy; if not, retain state filings or executor valuations.

Gifts Received

Gifted property usually carries the donor’s basis. Request documents from the donor or executor that show their original purchase price and improvements. Retain any gift-tax returns that might affect your basis calculations.

Business Owners

If you operate a business or side gig, use robust retention for income, expenses, payroll, and asset purchases. Keep invoices, mileage logs, payroll filings, and depreciation schedules. For listed property like computers or vehicles, maintain usage logs that support business-use percentages.

Digital Systems

Scanning is your friend. Create a simple folder structure:

Tax Year → Return, Proof of Filing, Year-End Income Forms, Brokerage, Retirement, Real Estate, Business, Other.

Name files with a consistent date and description—e.g., “2025-04-15_Return_Accepted.pdf” or “2019-06-01_Roof_Invoice_$12,400.pdf.” Consistency saves hours later.

Secure Storage

Use a two-location rule: encrypted cloud plus a local encrypted drive. Enable two-factor authentication everywhere. For especially sensitive items, keep a printed set in a fire-resistant safe. Test your backup restore at least once so you’re not learning under pressure.

What to Shred

After the retention period, shred duplicates that no longer serve a basis or compliance purpose. Keep indefinitely: copies of filed returns and proofs of filing, property basis folders for assets you still own, and estate documents that establish inherited values.

Quick Checklist

• Copies of all filed returns + proofs of filing.

• Year-end wage/income statements and related year-end forms.

• Closing statements and improvement receipts for real estate.

• Investment trade confirms and dividend-reinvestment records.

• Basis documents for collectibles or private assets.

• Estate appraisals and executor statements for inherited items.

Conclusion

Strong record-keeping protects your wallet: it proves compliance, preserves basis, and shortens any audit. Keep returns and proofs forever, preserve home and investment basis records while you own the asset (plus three years after sale), and back everything up securely. Choose one small organizing task this week and make it repeatable.