Which Receipts to Keep for Taxes?

You're standing at the checkout counter, and the cashier asks if you want your receipt. Most of the time, you probably say no. But what if that receipt could save you money on your taxes?

The truth is, most receipts don't matter for taxes. But some absolutely do, and keeping the right ones can make a real difference when you file your return. The problem is knowing which ones to keep and which ones you can safely toss.

Here's a practical guide to help you figure out what receipts are worth keeping, organized by the situations where they actually matter.

The Basic Rule: Keep Receipts That Lower Your Tax Bill

Before we dive into specifics, here's the simple principle: keep receipts for expenses that might reduce how much tax you owe. That usually means expenses you can deduct or use for tax credits.

If you're not sure whether something qualifies, keep the receipt anyway. It's easier to throw away a receipt later than to wish you had kept it when your accountant asks for it.

Medical Expenses That Actually Matter

Medical expenses can be deductible, but only if you itemize your deductions and your total medical costs exceed a certain percentage of your income. For most people, that threshold is pretty high, so this won't apply to everyone. But if you have significant medical expenses, these receipts are worth keeping.

Keep receipts for health insurance premiums you pay yourself (not through an employer), co-pays for doctor visits, prescription medications, eyeglasses or contact lenses, dental work, and medical devices like hearing aids or wheelchairs. Also save receipts for things like acupuncture, chiropractic visits, physical therapy, and mental health services.

Don't forget about the less obvious stuff. Parking fees and tolls when you're going to medical appointments count. So do transportation costs if you're traveling for medical care. If you need to stay overnight somewhere for treatment, those hotel receipts matter too.

The key here is that these expenses need to be for you, your spouse, or your dependents. And they need to be legitimate medical expenses - things like cosmetic surgery that aren't medically necessary usually don't count.

Childcare Expenses for Working Parents

If you pay someone to watch your kids so you can work, those receipts can qualify you for a tax credit. This is different from a deduction - a credit directly reduces your tax bill dollar for dollar, which makes it pretty valuable.

Keep receipts from daycare centers, babysitters, after-school programs, day camps, and similar childcare providers. If you hire someone to care for your child in your home, those payments count too. The care needs to be for a child under 13 or a disabled dependent, and it needs to enable you (and your spouse if you're married) to work or look for work.

The receipts should show who provided the care, when, and how much you paid. If you're paying someone directly, make sure you get their name and taxpayer identification number - you'll need that when you file.

Self-Employment Expenses

If you're self-employed or run a side business, this is where receipts really start to matter. Almost anything you buy for your business can potentially be deducted, which means those receipts directly reduce your taxable income.

Keep receipts for office supplies, equipment, software subscriptions, marketing expenses, professional services, and travel costs related to your business. If you work from home, you can deduct a portion of your utilities, internet, and even rent or mortgage interest based on the percentage of your home used for business.

The key is that these expenses need to be "ordinary and necessary" for your business. That's usually pretty broad - if it helps you run your business, it probably qualifies. But you need receipts to prove it.

One important note: if you're an employee (not self-employed), you generally can't deduct work-related expenses anymore. That changed in 2018. But if you're truly self-employed or have a side business, those business expense receipts are still valuable.

Charitable Donations

If you itemize deductions, charitable donations can reduce your tax bill. Keep receipts for any cash donations, and get written acknowledgments from the charity for donations over $250. For non-cash donations like clothing or furniture, you'll need a receipt showing what you donated and its estimated value.

The receipt should include the name of the organization, the date of the donation, and the amount or description of what you gave. Many charities automatically send these after you donate, but if they don't, ask for one.

State and Local Taxes

If you itemize, you can deduct state and local income taxes or sales taxes. For most people, this means keeping track of major purchases where you paid sales tax. You don't need every single receipt, but keeping receipts for big-ticket items helps if you're trying to maximize your sales tax deduction.

Property tax receipts are important too. If you own a home, keep those property tax bills and proof of payment. Those are definitely deductible if you itemize.

Home Improvement Receipts

While home improvements aren't immediately deductible, keep those receipts anyway. When you sell your house, the cost of improvements increases your basis, which can reduce your capital gains tax. Plus, if you're using part of your home for business, some improvements might be deductible as business expenses.

Keep receipts for major renovations, additions, new systems like HVAC or plumbing, and other significant improvements. Don't worry about minor repairs or maintenance - those don't increase your basis.

What You Probably Don't Need to Keep

Most everyday purchases don't matter for taxes. Grocery receipts, gas station receipts for personal use, coffee shop receipts, and similar routine expenses usually aren't deductible unless they're business-related.

If you're not self-employed and you take the standard deduction (which most people do), you probably don't need to keep most receipts at all. The standard deduction is usually better than itemizing for most taxpayers, which means those medical expense receipts and charitable donation receipts won't help you anyway.

How to Organize What You Keep

Once you know what to keep, you need a system. The simplest approach is to have one place where all tax-related receipts go during the year. A folder, envelope, or even a shoebox works fine. Then, once a week or once a month, go through them and organize by category.

Digital organization works well too. Take photos of important receipts with your phone and store them in a cloud folder organized by year and category. This is especially important for thermal paper receipts that fade over time. If you need to create receipts for your business expenses, you can use free receipt generators to make sure you have proper documentation from the start.

The key is consistency. Pick a system and stick with it. Don't let receipts pile up in random places - that's how you lose the ones that actually matter.

How Long to Keep Them

The general rule is to keep tax-related receipts for at least three years after you file your return. That's how long the IRS typically has to audit you. But many tax professionals recommend keeping them for seven years, just to be safe.

For business expenses, keep receipts for at least seven years. For home improvements, keep them until you sell the house. For major purchases, keep receipts until you dispose of the item.

When in doubt, keep it longer. Storage is cheap, but trying to recreate lost documentation is expensive and stressful.

Special Situations Worth Noting

If you're claiming the home office deduction, you'll need receipts for expenses related to that space. This includes a portion of your rent or mortgage, utilities, internet, and any repairs or improvements to that specific area.

If you're deducting vehicle expenses for business use, you'll need to track mileage or keep receipts for gas, maintenance, and repairs. Most people find the standard mileage rate easier, but if you use actual expenses, you need those receipts.

For meal expenses, the rules are stricter. You need to document who you ate with, what business was discussed, and the business purpose. A simple receipt isn't enough - you need to write notes on it or keep a separate log.

The Bottom Line

You don't need to keep every receipt, but you should keep receipts for expenses that might reduce your tax bill. Medical expenses, childcare costs, business expenses, charitable donations, and home improvements are the main categories that matter.

If you're not sure whether something qualifies, keep the receipt. It's better to have it and not need it than to need it and not have it.

The most important thing is to have a system. Pick one place to collect tax-related receipts, organize them regularly, and keep them for at least three years (preferably seven). A little organization now saves a lot of stress later when you're trying to file your return or respond to an IRS notice.

Remember, receipts are just proof. If you lose one, you might be able to get a replacement from the business or use bank statements as backup. But having the actual receipt makes everything easier and more reliable. For businesses that need to create professional receipts, online receipt tools can help ensure you're generating proper documentation for all your transactions.

Start today. If you have receipts floating around from this year, gather them up and start organizing. Future you will thank you when tax time rolls around.