Three years is the default answer, and it’s right most of the time. It’s also wrong often enough to matter.
The IRS generally has three years from your filing date to audit a return. But that window stretches to six years if you substantially understated income, and it never closes at all if you didn’t file or filed fraudulently. Separately, some records need to survive for decades regardless of any audit window, because they establish what you paid for something you still own.
Here’s what to keep, what to throw out, and where the rules differ from what people assume.
Why receipts exist at all
In a dispute over a deduction, the burden of proof sits with you, not the IRS. You claimed the expense, so you demonstrate it happened and that it was for the business.
That framing explains most of the rules below. A receipt is not a formality. It’s your evidence, and an auditor who can’t see evidence can disallow the deduction and add penalties and interest on top.
What makes a receipt valid
A usable receipt shows five things: the vendor name, the date, the amount paid, a description of what was bought, and the payment method.
A credit card statement alone is weaker, because it shows that you spent $340 at an electronics retailer but not what you bought. For ordinary expenses that’s often enough in practice. For anything the IRS treats as strictly substantiated, it usually isn’t.
The element people forget is business purpose, and no vendor prints it for you. Write it on the receipt or in your records at the time: which client, which project, which trip. “Lunch, $62” is not a deduction. “Lunch with [client] to discuss [project], $62” is.
The $75 rule, and what it actually says
This is the most misquoted rule in small business bookkeeping, so it’s worth getting exactly right.
The regulation says documentary evidence is required for any lodging expense while traveling away from home, and for any other expenditure of $75 or more, with an exception for transportation charges where a receipt isn’t readily available.
Two things follow that most articles get wrong.
It lives inside the strict substantiation rules, which cover travel, meals, entertainment, gifts, and listed property. It is not a general permission slip to skip receipts on anything under $75. A $40 box of business cards is an ordinary business expense under a different section of the code, and the $75 exception doesn’t reach it.
Lodging always needs a receipt. Any amount, no exceptions. A $45 motel room needs paperwork.
And even where the exception applies, you still need a written record showing the amount, date, place, and business purpose. The rule removes the requirement for a third-party receipt. It does not remove the requirement to document anything.
The practical advice, given all that: photograph everything. It takes two seconds and removes the need to remember which category a purchase fell into.
How long to keep things
| Record | Keep for |
|---|---|
| General receipts and expense records | 3 years from filing date |
| Employment tax records | 4 years |
| Records where income was substantially understated | 6 years |
| Records for worthless securities or bad debt deductions | 7 years |
| If you filed no return, or a fraudulent one | Indefinitely |
| Asset purchase records | 3 years after you dispose of the asset |
| Home purchase and improvement records | 3 years after you sell |
| Retirement account contribution records | Indefinitely |
| HSA receipts for unreimbursed expenses | Indefinitely |
The six-year rule is worth understanding because it’s not discretionary on the IRS’s side. It applies when more than 25% of gross income was omitted from a return. You may not know at filing time whether that describes you, which is a decent argument for defaulting to seven years on business records rather than three.
Several categories deserve more explanation.
Asset records outlive the audit window. If you bought a camera in 2019 and still use it, the receipt establishes your cost basis. When you sell or dispose of it, that basis determines your gain or loss, and that transaction opens its own three-year window. So the rule is three years after disposal, not three years after purchase. The same logic covers vehicles, equipment, and anything depreciated.
Home records are the big one. Purchase documents, closing statements, and every capital improvement receipt establish your basis in the property. A new roof, an addition, a kitchen renovation. Decades later, when you sell, those receipts reduce your taxable gain. People throw them out and pay tax on improvements they genuinely made. Keep a folder for the life of the house plus three years after the sale.
HSA receipts have no expiry. You can reimburse yourself from an HSA years after the medical expense, provided the account existed at the time and you never claimed the expense elsewhere. That strategy only works if you kept the receipt, and the timeframe is unlimited.
Retirement contribution records matter because they establish your basis in nondeductible IRA contributions. Without them you can be taxed twice on the same money.
What you can throw away
ATM slips and deposit slips once the transaction shows on your statement.
Receipts for personal purchases with no warranty, no return period, and no tax consequence. Groceries, fuel for personal driving, ordinary consumer spending.
Monthly statements once you have the annual summary, for accounts where the annual document is complete.
Paycheck stubs once you’ve checked them against your W-2 for the year. Keep the W-2 itself.
Duplicate copies of anything.
Digital is fine, and better
The IRS has accepted electronic records as equivalent to paper since Revenue Procedure 97-22 in 1997. The conditions are reasonable: the digital copy must accurately reproduce the original, your system must be able to index and retrieve records reliably, and the storage must be reasonably secure against alteration.
A phone photo dropped into a dated folder in cloud storage satisfies this. A dedicated receipt-scanning app does too.
There’s a practical reason to go digital beyond convenience. Thermal paper receipts, which is most of them now, fade. Depending on storage conditions they can become unreadable in one to three years, well inside the audit window. A faded receipt is functionally the same as no receipt, so the box in the closet is not the safe option it feels like.
Name files so you can find them under pressure: 2026-03-14_vendor_amount_purpose. An audit request comes with a deadline, and a folder of 4,000 files called IMG_2847 is not a record-keeping system.
State rules are not federal rules
State tax agencies set their own statutes of limitation, and several run longer than the federal three years. California’s Franchise Tax Board generally has four. Some states extend further in specific circumstances.
If your state runs longer, your state’s period governs how long you keep records, not the federal one. Check your own state rather than assuming the three-year default covers you.
Sales tax records, if you collect it, follow a separate state schedule again and are often audited more aggressively than income tax.
Non-tax reasons to keep a receipt
Some records matter for reasons that have nothing to do with the IRS.
Warranties and return periods, obviously. Keep the receipt at least as long as the warranty runs.
Insurance claims. A home inventory with purchase receipts and photographs is what turns a contested claim into a paid one after a fire or a burglary. Store that copy somewhere outside the house.
Major purchases you might resell. Documented provenance affects the price on anything from a bicycle to a camera body.
Disputes with a contractor or vendor, where a receipt plus the original quote is the whole of your position.
A system that survives contact with reality
The failure mode is never the filing system. It’s the gap between spending money and recording it.
Photograph the receipt when it’s in your hand, before you leave the counter. Write the business purpose in the photo’s filename or in a note. Once a month, sort the folder and reconcile it against your account statement, which also catches anything you missed.
Keep business and personal separate at the account level, so you’re not sorting them at all.
Then, once a year, move the completed year into an archive folder and leave it there for seven years. Deleting on a schedule is fine. Deleting because a folder looked old is how people lose the one document they later need.
The mistakes that cost people money
Throwing out home improvement receipts, then paying capital gains tax on the value of improvements they actually made.
Relying on the three-year rule when a six-year situation applies, and having nothing when the question arrives in year five.
Keeping thermal receipts in a shoebox and finding blank paper when it matters.
Assuming a credit card statement substantiates a deduction. It proves you spent money somewhere. It doesn’t prove what you bought or why.
Recording no business purpose, which is the single most common reason an otherwise legitimate deduction gets disallowed.
None of this is complicated. It’s a habit that takes two seconds per receipt and a monthly review that takes twenty minutes, and it’s the difference between an audit being an inconvenience and an audit being expensive.
