Tax season is behind us (finally!) and, while most people are ready to move on, it can help to reflect a bit on a few things that might make tax time a little easier next year. One is knowing what things to track for taxes. Another is having a system in place to help you track tax-related items.
Regardless of whether you take the standard deduction or itemize, track charitable contributions. Even people who do not itemize can deduct up to $300 (up to $600 if married filing jointly) in contributions on their federal return, and Colorado residents can deduct contributions over $500.
The following is a list of other things to track for taxes.
They may not be captured in tax forms, but you need to include them on your tax return.
Income not reported on a W2, 1099, or a K-1 (such as rental property income)
Rental properties
- Rents and other income associated with a rental property, including tenant security deposits
- Expenses (improvements, repairs, taxes, property management, mileage for maintenance trips)
- Number of days you stayed in property for leisure
- The number of days you stayed in property to perform maintenance
- Number of days you rented it to others
College expenses
- Expenses that were not sent directly to institution (computer, books and supplies, etc.)
Dependent care tax credit
- Qualifying childcare costs
One-time changes
- Sale of home-keep a copy of the settlement statement
- If someone in the household goes back to work, changes jobs, or gets a significant raise or decrease in income
Health costs
- Unreimbursed medical expenses in excess of 7.5% of your adjusted gross income (AGI) can be deducted. This is a very high threshold but a large, unexpected health event at some point during the year may push you over the limit and allow you to deduct expenses. If you aren’t expecting to qualify, do not spend a lot of time tracking these expenses. If, however, you can “tag” unreimbursed expenses in your cash flow system, or put a copy of the invoice into a file, then it will be easier to add up your payments if you do have an expensive health event.
- For medical expenses paid for or reimbursed from your Health Savings Account, you should keep records which support that the distributions from your HSA were used for medical expenses.
Home improvements
- Any significant home improvements (those that increase the value of your home- These expenses may add to the cost basis of your home, which is important someday when you sell. Be sure to save a copy of these expenses with your home purchase information.)
- Items qualifying for energy efficient credits (
Educator expenses
If you are an eligible educator, you can deduct up to $250 of unreimbursed expenses such as classroom supplies, professional development expenses, books, etc.
Colorado 529 plan contributions
Contributions to a Colorado 529 plan are deductible on your Colorado tax return.
Put a system in place for tracking tax items:
If you don’t already have one, put a system into place to track these tax-related items, and consider using a multi-part system to track tax-related items:
- If you use a cash-flow system like Mint, use tags to flag tax-related transactions. At the end of the year, you can download a list of tagged transactions and sort them as needed.
- Keep a file folder wherever you do paperwork (kitchen, office, bedroom). Use the file to store paper copies of tax-related documents.
- Use flags (or a folder in your email system) to store tax-related emails (donation and tax payment confirmations, etc.)
- Each year, before meeting with your CPA, upload copies of all the above to an electronic folder, organized by year, with sub-folders based on topic (income, property, child, charity, etc.). This will make it easy to find information and submit it to your tax professional.
Related: If you make charitable contributions and claim the standard deduction on your federal tax return, you may benefit from the Colorado Charitable Contribution Subtraction.
