When you prepare your taxes, a credit card bill can provide valuable information about purchases you made or expenses you incurred during the year. Your credit card bill shows proof of payments made to merchants, companies or providers that may be deductible or eligible for tax credits. While it is perfectly acceptable to use your credit card statements to prepare your return, depending on the type of expense, you may also need to track down an itemized receipt to keep with your records in case you’re ever audited.
Gather all credit card bills for each month of the year.
Look at each purchase to determine whether it is a charge you can use toward your tax deductions or credits. Examples may include payments made for health insurance premiums, prescriptions or other medical expenses, payments made to child care providers and tuition payments made to colleges.
Mark each eligible expense on the credit card statement and total the amounts from each category.
Enter the totals from each category into the appropriate sections of your tax return. If you’re using tax preparation software, the interview questions within the program should provide an area for you to enter your calculations. The software will transfer your entries to the appropriate areas of your return.
Analyze your expenses to determine whether you need additional records. For example, if you’re deducting health insurance premiums you pay yourself, a credit card charge to an insurance company is self-explanatory. However, if you’re deducting the cost of a prescription you filled at a chain retailer, a credit card charge won’t show that you paid for medicine. In this instance, you’ll also need an itemized receipt to show you paid for a valid medical expense and not something else the store carries. You won’t need the itemized receipt just to prepare your return, but you’ll want it on hand in case you’re audited.
Keep a copy of any credit card bill you use to calculate your entries with your tax records, along with any itemized receipts you gather to confirm your deductions. You’ll want to keep these records for at least three years from the date your return is due or the date your return is filed, whichever is later. This covers the amount of time the IRS has to audit the return.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.