Record Retention
We generally recommend keeping your records regarding annual income and expense items that are relevant to your tax return for seven years. The general rule for the “statute of limitations on assessment” is three years. However, to be safe, seven years is a good rule of thumb. One big exception – you should keep a permanent file for items that impact cost basis of assets; such as the cost of your home and any improvements made to the home. Examples of improvements are: a new kitchen, new bathroom, new roof, etc. Items that are considered general repairs and maintenance should not be included in the permanent file. Examples of repairs and maintenance are: repainting and existing room, repairing an existing roof, lawn maintenance, etc. Another example of basis information you should keep is your records relating to stock purchases, as well as mutual funds. Beginning in 2011, brokerage firms are required to keep this information, however, they were not in the past. Accordingly, you should be careful to maintain your historic purchase information on securities still held in your portfolio.