When I help people organize their paperwork, we usually come across stacks of receipts. Which ones are worth keeping? The following guidance applies to the U.S., but similar guidelines may apply elsewhere, too.
Receipts for small cash purchases
If you bought a coffee at Starbucks, there’s no need to hold onto that receipt. You don’t even need to shred the receipt since it contains no personally identifying information that could cause problems if someone else saw it.
Receipts for credit/debit card purchases
You may want to keep those until you get your credit card bill/bank statement and can confirm the charges on the bill/statement match up to your receipts.
Receipts for high-value items
These receipts can be useful for insurance purposes if you are unfortunate enough to have a theft, a fire, or other loss. Because paper records would get lost in a fire along with the items on the receipt, it’s good to keep these receipts electronically (with an offsite backup), in a safe deposit box, or in a fireproof safe in your home.
Receipts for items you might want to return
If you’re not sure you want to keep something or if it’s an item under warranty, keeping the receipt until the end of the allowed return time or the end of the warranty period might be useful.
Receipts for tax purposes
If you itemize your deductions, you’ll want to keep receipts for any expenses you can deduct. And if you’re self-employed, there are many receipts that may be important. Check with your tax preparer (or review the information on the IRS website) to identify exactly which expenses are deductible and how long they should be kept. The Cohan rule may help you out if you lack receipts, allowing expenses to be estimated, but life will be much easier if you do have the receipts.
If you own your home, keep the receipts for all home improvements. When you sell your home, the cost of those improvements will reduce your taxable gain. I have friends who are selling their house this year and didn’t keep good records for their many improvements, and now they need to scramble to pull the information together. That’s no fun.
Miscellaneous tips regarding receipts
Cash register receipts printed on thermal paper fade over time. If you have some of those, scan them or make a photocopy as soon as possible, while the receipt is still legible. You may be able to scan such receipts and darken them after they’ve faded, but creating and saving legible copies right away will save you that bother.
If a tax-related receipt doesn’t identify exactly what was purchased, writing that information on the receipt at the time of purchase will save you frustration in the future, as I have found from sad experience.
Some stores offer the option of emailed receipts rather than printed receipts. If you deal well with electronic records, this can reduce the paper clutter. My grocery store offers emailed receipts, and I definitely prefer them to paper.