What can I deduct & what receipts should I keep for my taxes?
When you claim a deduction on your personal income taxes, you should keep receipts to prove your deduction in the event you are audited. Keep receipts for a minimum of three years. In some cases, you may want to keep receipts longer. For example, if you purchase a piece of equipment, keep the receipt as long as you own the equipment, not only for tax and warranty records, but for insurance records in case you have to file a claim after there are no longer any tax implications.
Schedule A Deductions
Schedule A is used to itemise personal deductions such as medical expenses, taxes and mortgage interest on your home. The Internal Revenue Service (IRS) provides standard deductions for everyone who files income taxes. This amount has increased slightly each year. However, if you have excess medical expenses or pay more than the provided standard deduction, you may file Schedule A to claim this deduction in lieu of the standard deduction. If you are an employee with qualified deductions such as using your personal vehicle for work, keep gas receipts and mileage records to support your deductions. Keep medical statements and receipts for medications. If you buy durable medical equipment such as a wheelchair or crutches, keep the receipts. Also keep records of any reimbursements you receive from your health insurance. Keep receipts for your mortgage payment and confirm that the payment was credited to your account properly before you discard it. If you purchase big ticket items where you pay a large amount of sales tax, keep the receipt to deduct from your Schedule A.
Schedule C Deductions
Self-employed and contract labourers who receive a 1099 instead of a W-2 Tax and Wage Statement may deduct expenses that are work related on Schedule C. Freelance writers may include the cost of their Internet service, postage and office equipment as legitimate business expenses. If an item is used for both personal and business, only the portion that is used for business may be deducted as an expense. Business records should include copies of receipts preferably attached to the cancelled check or credit card slip used to pay the expense. If you determine that the purchase is deductible on your taxes, keep the receipt for your records. File your receipts by expense category rather than by date or vendor to improve your ability to double check your income tax entries and in case of audit.
Schedule E Deductions
Rental properties that you own such as an apartment complex or second house may have expenses you can deduct from your income taxes. If you pay the gas and water bills while your tenant pays the electrical, you can deduct the cost of the gas and water from your gross rental income. Property taxes and mortgage interest on your rental property are also deductible on Schedule E. Keep all receipts that pertain to your rental properties. These can include receipts for paid advertising to rent the property, a can of paint or cleaning supplies used when a tenant leaves. Keep receipts for any gas you purchased if you use your car to handle your rental properties. Keep mileage records to validate how many miles you drove for business compared with personal driving.
Schedule F Deductions
Agricultural business owners, such as a farmers or ranchers, deduct their expenses using Schedule F. This includes mortgage interest, and you should keep receipts for feed you purchased for your animals and receipts for seed and plants you used for your commercial crops. When you purchase an animal, get a bill of sale and a receipt for the purchase. Many states require that animals be branded within 30 days of the sale and a bill of sale will protect you while you are waiting for the brand to heal. Other receipts you should keep include any fuel used in the agricultural business, maintenance receipts and receipts for equipment purchases.
Miscellaneous Credits and Deductions
You should also keep receipts for any miscellaneous credits and deductions you claim directly on your 1040 personal income tax form. These can be related to education expenses, new homeowner's tax credits, or proof of support for claiming a dependent such as a parent or child. Education receipts can include meal plans, college books and tuition costs. Keep any receipts you receive when you purchase your new home. You may receive a receipt for a down payment, for property taxes and for deposits on utilities. Claiming a child as a dependent can be difficult without receipts to back up your claim. If you pay for food, clothing, school supplies or tuition to a private school, keep the receipts.