I'm a college student, and in the past my parents have generally handled my finances for me so I haven't had to think about them. But I'll likely have to start doing my own taxes soon. Does that mean I need to start keeping my receipts (for food, etc.)? Or is it just a good idea? All the money I spend comes out of an account that I can track pretty easily online, so I'm not sure exactly what I need receipts for.
If I'm going to start doing my own taxes soon, do I need to start keeping receipts for everything?
Does the state where you reside have sales tax, if so how much. being able to claim the max on sales tax is one of the few reasons for a college student to keep every receipt.– Chuck van der LindenJun 17, 2011 at 20:21
Massachusetts has a 6.25% sales tax.– Qiaochu YuanJun 17, 2011 at 20:40
You don't need to keep receipts for most things, and if you are not going to itemize your deductions (which as a college student, you probably won't), you need even fewer. Things that you should always keep:
- Your last pay stub for the year, to check against your W-2 (optional, but possibly useful).
- Anything related to investments (buying/selling stock, IRA contributions, etc.)
- Anything related to buying/selling property.
If you are itemizing your deductions, you want to keep receipts for anything that you can itemize. Some common things are:
- State and local property and income taxes
- Medical expenses
- Charitable contributions
- Unreimbursed job related expenses
Another thing that you should do, but few people do, is keep track of your online purchases, since many states require you to pay sales tax on those purchases. Of course, the state has no way of knowing what you buy online, so it is all done on the honor system.
You need receipts only if you claim deductions in the itemized deductions section based on them.
You itemize deductions only if your claims exceed the standard deduction (which for a single person was $5,800 last year). Even then, you need receipts for everything only if you claim sales tax as the deduction (you have to buy really a lot to pass $5K with sales tax...). I would expect people to pay more in state income taxes than sales taxes (you can claim either this or that, not both).
For food - there are no taxes (at least here in California), so nothing to deduct anyway.
In any case, you can always scan your receipts and keep them in the computer, for just in case, but IMHO it's waste of time, pixels and gigabytes.
Here's a question which deals with the same issue, read the answers there as well.
When you say food are you referring to groceries or restaurant food? I'm assuming groceries. Anything that is made by a person has sales tax though, right? Jun 17, 2011 at 22:10
@d03boy In California there's no sales tax on food. There's sales tax on restaurant dining (I'm not sure precisely how it goes, but if I remember correctly it has something to do with the food being hot and/or served. I know that on cold sandwiches in Subway there's no tax, but on hot - there is). Jun 17, 2011 at 22:31
@d03boy (and littleadv) I'm fairly certain that the there are no taxes on groceries throughout the US. (Or, at least, most of it.) Regarding restaurant dining, I believe that it's taxed on the notion of it being prepared. It's been a while since I've been in California, but I'm fairly certain that I've payed sales tax at Subways elsewhere. Jun 17, 2011 at 22:45
@George - actually you're wrong and I was almost right. Quote from the Franchise Board site: "Tax applies to sales of meals or hot prepared food products (see (e) below) furnished by restaurants, concessionaires, hotels, boarding houses, soda fountains, and similar establishments whether served on or off the premises" - the food must be both hot and prepared to have sales tax charged on it, that is why I didn't pay taxes on the Subway cold sandwiches. Jun 17, 2011 at 22:52
1In other words, coffee applies. I just remember coffee being taxable when I was a cashier but didn't really understand why. Maybe because they assume hot is prepared right then and there whereas a cold sandwich could be made in a factory or something. Not sure why that really matters but... you know. Jun 18, 2011 at 0:36
It's rare that you'd start to itemize before you have a house and the property tax and mortgage interest that brings. If your state has an income tax, that's first, but then you'll usually need far more in deductions to be over that standard deduction.
The other reason you might want to keep receipts is if you do any freelancing or contract work, for your business expenses. You can take a picture of the receipts with your phone, or scan them - you don't have to keep the paper copies.