A question we often get from clients is what receipts should they be saving throughout the year, so they can write off those expenses off on their taxes. There are lots of ways to try and reduce the amount of tax due on your return at the end of the year, one of them being through deducting expenses you have throughout the year. It’s important to remember that not all of your expenses are deductible on your tax return. Knowing which receipts to save and which to throw away can help you maximize your tax refund or lower your tax liability and minimize the amount of paper you must keep for your tax return each year. A good first place to start looking is at bills you’ve already paid and purchases you have already made this year.
One expense you can deduct is medical expenses. For instance, if you have a health condition that requires expensive prescriptions or had to have a surgery this year with a high co-pay, those expenses may qualify for a deduction on your tax return. For you to qualify for this deduction, your expenses would need to be higher than 7.5% of your adjusted gross income. Qualified deductions include any of the following expenses paid for either you, your spouse, any dependents or children you have claimed:
- premiums for medical, dental, long-term care, vision,
- co-pays for medical, dental or vision
- The cost of eyeglasses, contact lenses, prescription medicine, breast pumps or other lactation aids, crutches, hearing aids, braces, wheelchairs and other medical aids. Also all costs associated with guide dogs and medical exam or test fees
- Acupuncture, chiropractic services, podiatrists, sessions with a psychiatrist or psychologists, occupational and physical therapy sessions.
- Nursing care, hospital stays, programs to help you stop smoking or weight-loss programs for the treatment of obesity
- The cost of parking fees, tolls, transportation and mileage for the trip to and from appointments, or transportation via ambulance to a medical facility.
Another expense you should keep receipts for is childcare expenses. You can receive a credit for a child or dependent care expenses. This can include expenses paid to a babysitter, day camp, daycare, or after-school program. If you have someone take care of your child at home, you may qualify for additional expenses such as the cost of a maid, cook or housekeeper. These expenses will only qualify if you paid them to enable you and your spouse, if you’re married, to work or look to work. You and your spouse must both have earned income. The exception to the rule is if you or your spouse are disabled or a full-time student. If you meet the requirements, those expenses may qualify for the child or dependent care credit which yields a credit of $3,000 for one child or $6,000 for two or more children.
You should also keep receipts for any charitable donations you make. When donating money or items, make sure the charity gives you a tax receipt that lists the amount of the donation. If you are self-employed, there are many expenses that could be used on your tax return such as materials, utilities, tools, marketing, as well as other general business expenses. If you made a large purchase (such as a vehicle or boat) this year where you paid more in sales tax than you did in income tax, this may qualify for a deduction on your tax return.
Even after you file your tax return, you should still keep those receipts for your expenses. That’s because you should keep your receipts incase the IRS or your state’s department of revenue decide to audit you. Most audits can only go back three years (from the date you file your tax return), but in some dire cases where fraud or severe tax underpayment is suspected, the IRS can audit you back to six years (again, from the date you file your tax return).
Since everyone’s tax situation is different, it can be difficult to say what receipts YOU should keep throughout the year. If you are questioning whether you are holding on to the right receipts, contact Polston Tax to set up a tax planning meeting so that we can tailor a game plan for you this tax season! Call us today at 844-841-9857 or click below to schedule your free consultation.