Real Estate related tax documents
Purchase information and receipts for improvements and upgrades should be held for as long as you own the property. If the property is an investment, the cost of improvements and upgrades may increase the property's basis and potentially reduce your taxable capital gain. If the property is your main residence, you might qualify for the $250,000 gain exclusion (single) and $500,000 (married) and that will cover most people's capital gains - but not all. It's still good to keep the receipts.
The IRS has three years to audit tax returns unless income has been seriously under-reported (appearance of fraud). Note - that's three years after your tax return is filed. If you filed your 2016 tax return on 4/15/17, add three years to that and you can shred your 2016 tax records after 4/15/20 as long as you're not being audited. Some states' statutes of limitations might be up to five years - check the rules for your state first.
Stocks and Mutual Funds
Purchase records for stocks and mutual funds should be kept until three years after a security has been sold. However many brokerages include basis information (date the security was purchased, price and number of shares) for form 1099B in the year the security is sold. In that case the original purchase documents might not be necessary.
Many taxpayers diligently save their medical expense receipts. However medical expenses must exceed 10% of the taxpayer's adjusted gross income before the deduction has any effect. Most taxpayers don't have enough medical expenses unless they have undergone medical treatment.
Mike Bates (Realtor Associate)
CENTURY 21 iProperties Hawaii
1585 Kapiolani Blvd #1533
Honolulu, HI 96814