How to Track Tax Deductions
Filling out your tax return with a pencil and paper has always been a chore, especially when trying to keep track of multiple tax deductions. In the old days, you had to slog through boxes full of receipts and enter their values into a calculator. Those days, thankfully, are no more. New web-based computing technology has finally made it easy to keep track of all your charitable donations, mortgage interest payments and retirement account contributions, to name just a few.
Step 1: Create a free TurboTax account
Go to TurboTax.com and scroll down to the bottom of the page to choose the type of tax return you would like to prepare. Click the “Create an Account” button and input the required information. There is no charge to create an account and you can even start preparing your return without providing information by clicking on “Try It Free.”
Step 2: Sign in to your new account
When you login to TurboTax, you will see a screen with a series of tabs across the top. Click on the first tab to input some of the personal information the IRS requires you to report on your tax return. The software will generate a tax return with all of your information such as name, address and Social Security number in the appropriate boxes on your tax form. Click “Continue” and check off all the life events that have occurred for you this year.
Step 3: Input deductions
Click through to the “Federal Taxes” tab. This is the tab that allows you to input every single deduction you anticipate claiming on your return this year and saves your information so you can track all deductions as you go. To get started, click on “Deductions & Credits” at the top. TurboTax will guide you through this section and ask you questions about your expenses to insure that you don’t miss any tax-saving deductions. For example, the program asks whether you own a home and for the amount of loan payments you made during the year to calculate the mortgage interest deduction. As you work through this section, the software will ask questions about every possible deduction you may qualify for such as donations to charity, certain car expenses, education expenses, medical expenses, and so forth. When you are finished, click “Done with Deductions.” Since you can save all information, you can update, delete and add any other deductions before you finalize your return and send it to the IRS.
Step 4: Compare your itemized deductions to your standard deduction
When you have no more deductions to add, you will have a choice to claim the standard deduction or the total of all your itemized deductions that TurboTax already had you input. Generally, you will save more in taxes if you choose the larger of the two. If the standard deduction is larger, then you will not be able to deduct many of the expenses you reported on the software.