If you want to be extremely safe, you might want to hold onto them for three years in the event of a tax audit from the IRS. However, the likelihood of your car insurance factors into a possible tax audit is extremely low unless your car insurance premiums adjust your tax return greatly. Typically, you don’t need to keep the prior year’s car insurance records. But if one of the following two examples applies, you should hold onto your documents longer.
You’ve recently filed a claim and the claim hasn’t yet closed. This is important because a car insurance claim can last for years if injuries are involved. In most states, the statute of limitations for injury claims is three years from the date of loss. Meaning, if you cause an accident and the other party stated they were injured, they have up to three years to submit a bill. Your insurance carrier will close the claim if it has been inactive for months but it can be reopened if a bill is submitted a year later if it’s within your state’s statute of limitations.
If you heavily use your car for business. It’s best to follow tax audit advice. The IRS can go back six years if more than 25% of income was omitted from the tax return. Also, there’s no statute of limitations if the IRS proves you filed a fraudulent return. If you are eligible to write off your insurance premiums when you file your taxes or written off car insurance-related expenses keep your premium documents for three to seven years with your tax file.
If those don’t apply, you are not required to keep prior years’ records. If you’ve been insured with the same carrier for years, keeping your records for a few years is a good idea. Reviewing surcharges and premium costs from the past to the present could give an idea if a miscellaneous charge has been added or the rates increased.