Income tax season is a time that many dread each year. Most would rather spend their free time doing more fun activities, after all, than spend hours filling out tax forms. With careful planning, however, filling out your taxes doesn’t have to take up too much of your free time.
The following are some common income tax documents you should save each year to make sure your tax preparation is as smooth as possible. It’s also important to keep in mind as you review this list that the tax code changes every year. Some things that are tax-deductible one year may not be tax-deductible the next.
Income from Wages and Tips
If you are an employee, a W2 form will be issued by your employer. This form shows your gross earnings, Social Security and Medicare contributions, and federal and state taxes withheld.
Over 57 million workers in the United States now earn their livings as freelancers, and this number is expected to increase in the coming years. A 1099-MISC form will be issued to you if you earn more than $600 from a company as a freelancer in a tax year.
If you are a business owner, it’s important to keep detailed financial records of all business activities. Documents you will want to save for your taxes include:
- Sales records
- Payroll records
- Bank statements
- Ownership records
- Receipts for inventory and equipment purchases
- A mileage log if you use a vehicle in the operation of your business
Investment accounts that are not tax-protected may have taxable events throughout the year and investment income, such as commodity trades and dividend distribution, may result in taxable income. Because of this, you will want to keep all account documentation you receive from brokerages, mutual funds and other trading institutions.
Some medical expenses may be tax-deductible. Be sure to keep receipts for all medical expenses you incur each year including insurance premiums if you pay for your plan yourself. You should also keep any receipts for medically necessary home renovations like wheelchair ramps, adding handrails or grab bars or the installation of a stairlift.
Certain life events may qualify for tax deductions, tax credits or change your tax filing status. Be sure to keep all documents pertaining to the following:
- Death of a spouse
- Alimony payments
- Child custody agreements
- Having a baby
Higher Education Expenses
Expenses related to earning a college degree may qualify for a tax credit. Be sure to save receipts for all educational payments you make each year for tuition, books, fees and other things.
Donations made to charitable donations may be tax-deductible. When you give, legitimate charities will provide you with a receipt or a letter documenting your gift. You will want to keep this documentation since it serves as proof of your donation if you itemize deductions.
If you have a child under the age of 13, you may qualify for a tax credit if you have childcare expenses. Be sure to keep records of all payments to daycare centers, summer camps, babysitters or other childcare providers.
Buying a Home
If you are a homeowner, you may be able to take advantage of certain deductions, like the interest on your mortgage and the purchase of mortgage points. Documents you should save include:
- Closing documents
- Receipts for home improvement projects
- Annual mortgage statements
- Property tax receipts
Retirement Contributions and Distributions
Contributions to certain retirement accounts, like 401K or IRA plans, are made with pre-tax dollars. This means you aren’t taxed on the money in your accounts until you start to make withdrawals. Be sure to keep all documentation involving the establishment of your account and anything that shows records of your balance, contributions and withdrawals.
For More on Personal Finance Topics
If you have more questions about other personal finance topics that matter to you, visit the Learning Center on TD Bank’s website.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular TD Bank product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.