The deadline to file your federal income taxes is rapidly approaching, and for those who itemize deductions, own and operate a small business, or are a sole proprietorship, the gathering of tax records and receipts is crucial component. Regardless of whether filing using a paper return or filing online, this gathering of documents and receipts are key should you ever be subjected to an IRS audit.
Those who are itemizing expenses and deductions need to know which receipts are a priority to have on file. Find out exactly which 8 tax records you keep handy and why in order to be well-prepared when you file.
1. State and Local Income Taxes
If you are unfortunate enough to live in an area where you pay state and/or local tax on your income, keep these tax records on hand as they are considered deductions, i.e. the federal government won’t tax you twice for this income. Each state and locality has their own documents they use to prove you owe and have paid these taxes.
2. Mortgage Interest and Taxes
If you paid any kind of mortgage last year, by now your bank or lender should have sent you Form 1098, aka the Mortgage Interest Statement. This interest is considered tax deductible, as are any property taxes you have paid on your home. So for my fellow Harris County residents, save those HCAD (Harris County Appraisal District) statements that show how much property tax you have paid for the tax year.
3. Medical Expenses
Your medical expenses are deductible on your taxes if they exceed 10% of your AGI (Adjusted Gross Income). For example if your AGI is $50,000, you must have at least $5,000 of qualified medical expenses. How to get to 10% of AGI? All of the below are legitimate medical expenses:
- Doctor and specialist visits
- Prescription costs
- Lab, imaging, and diagnostic testing
- Dental costs
- Doctor recommended exercise program costs
- Surgeries
- Hospital and ER care
- and many others as listed here
4. Tax Records for the Business Use of Your Home and Automobile(s)
Do you have a home office? You may deduct it as part of your itemization depending on how big your home is and how much space is used for the home office. If you drive your car for work related errands – not including driving to and from work – you may claim the mileage of the vehicle, provided you are not reimbursed via another means.
5. Educational Tax Records
Are you a student of any sort? You may deduct a whole host of educational expenses related to your academic pursuit. This includes tuition, parking fees, books, internet usage, lab fees, and even any travel related to your education.
6. Job Search Costs
Did you look for a new job during the last tax year? You may write off the expenses you incurred when looking for one. This includes the cost of printing resumes, mileage for driving to and from interviews, postage, expenses for job posting boards, internet fees, and more.
7. All Income
A no-brainer, all tax payers should keep all records of how much income they made in the year to include W-2 forms, check stubs, alimony receipts, child support records, and more. These are crucial not just so you know how much you made, but also so you know how much you didn’t make should the source of this income, aka your employer or ex-spouse, misfile your information with the IRS.
8. Charity
Those who wrote a check as a donation to a charity, church, foundation, soup kitchen, or similar can deduct this amount on their taxes. The same goes for any items donated to a Goodwill, Salvation Army, or the like. If the agency is eligible for tax deductible donations, they should offer you a receipt, which you must keep in the event of an audit.
Houston Tax Record Help
If you live in Houston and need help with your tax returns, student loans, bookkeeping in general, send us an email or give us a call at 281-894-6494.