What Receipts Should You Keep for Taxes?

Tax season often confuses taxpayers about which receipts are essential to retain. Proper documentation is vital for maximizing deductions and avoiding audits. By keeping organized records, individuals can claim eligible expenses and potentially lower their taxable income.

Understanding which receipts to keep is key to effective tax management. This guide explores the types of receipts necessary for various aspects of personal and financial life.

Business and Work-Related Expenses

For both self-employed individuals and employees, deductible business expenses can significantly reduce tax liability. The IRS allows deductions for ordinary and necessary expenses incurred in business, as stated in Section 162 of the Internal Revenue Code. This includes travel, meals, and office supplies, each requiring specific documentation.

Travel expenses must relate directly to business activities. Receipts for airfare, lodging, and car rentals should include details about the trip’s business purpose. Meals, deductible at 50%, require receipts specifying the date, location, and business relationship of attendees. Failing to meet IRS guidelines can lead to disallowed expenses and penalties.

Office supplies and equipment also need clear documentation. Receipts should show the purchase date, vendor name, and item description. For larger purchases, such as computers or furniture, depreciation rules under Section 179 may allow immediate expensing up to a certain limit, benefiting small businesses.

Medical and Healthcare Receipts

The IRS allows deductions for unreimbursed medical expenses exceeding 7.5% of your adjusted gross income (AGI) for the tax year 2024. Accurate documentation is essential to claim these expenses.

Receipts for doctor visits, hospital stays, prescription medications, and certain prescribed over-the-counter drugs should be kept. Dental and vision care costs, such as braces or eyeglasses, are also deductible if paid out-of-pocket and not covered by insurance.

Non-traditional treatments like acupuncture, chiropractic care, and mental health counseling are deductible if deemed necessary by a medical professional. Expenses for medical equipment, like wheelchairs or hearing aids, also qualify. Detailed records, including receipts and supporting documentation from healthcare providers, are crucial.

Documentation for Education Costs

Education expenses can qualify for various credits and deductions. The IRS offers tax benefits for education-related costs, each with specific eligibility requirements.

The American Opportunity Tax Credit (AOTC) provides up to $2,500 per eligible student for the first four years of higher education. Students must be enrolled at least half-time in a degree program, and expenses must be supported by receipts and 1098-T forms from educational institutions. Qualified expenses include tuition, fees, and required course materials.

The Lifetime Learning Credit (LLC) offers up to $2,000 per tax return for qualified education expenses, regardless of enrollment status or degree pursuit. The IRS requires invoices and payment records to substantiate these claims.

Proof of Charitable Contributions

Charitable donations can provide tax benefits if properly documented. The IRS requires proof to claim these deductions.

For cash donations under $250, a bank record, such as a canceled check or statement, is sufficient. Contributions over $250 require a written acknowledgment from the charity, specifying the donation amount and whether any goods or services were received in return.

Non-cash donations, like clothing or household items, need a detailed description, their condition, and an estimate of fair market value. Donations exceeding $500 require Form 8283, and contributions over $5,000 may necessitate a qualified appraisal.

Real Property and Home Improvement Records

Managing real property and improvements requires careful documentation. The IRS permits taxpayers to adjust the basis of their property for certain improvements, which can affect capital gains calculations during a sale.

Receipts and contracts for substantial improvements—such as a new roof, energy-efficient windows, or kitchen remodeling—should be retained. These improvements can increase the property’s basis and reduce taxable gains upon sale. Repairs, however, do not adjust the basis.

Documentation is also required for casualty losses or energy credits. For instance, claiming a residential energy credit for solar panel installation requires receipts and manufacturer certifications.

Investment Transaction Receipts

Investment transactions demand meticulous recordkeeping. The IRS requires taxpayers to report gains and losses, necessitating detailed records of purchase and sale dates, amounts, and fees.

Brokerage statements, trade confirmations, and dividend reinvestment records should be kept. These documents ensure accurate reporting of investment income and capital gains. The IRS also requires specific identification methods, such as FIFO or LIFO, for cost basis reporting.

For complex transactions, such as stock splits or mergers, additional documentation is needed to reflect changes in cost basis. Regularly organizing investment records ensures compliance with IRS rules and optimizes tax outcomes.