While filing taxes is often seen as a chore, if you find yourself paying by check for things like donations, gifts and services throughout the year, you may find yourself digging through less documents and receiving more tax breaks.

This information regarding common tax breaks that people commonly use checks for will enable you to prepare and reference your paper trail for an easier return:

  • Child Care Tax Credit.

    Currently, you may receive up to 35% of what you paid for child care back depending on your adjusted gross income. You may use up to $3,000 of expenses paid in one year for one qualified dependent or $6,000 for up to two qualified dependents to figure the credit. When paying your childcare provider with checks, you will be able to seamlessly track the total amount paid at the end of the year to make sure that you’re receiving the largest amount back possible.
  • Paper Trail for Paying Contractors / Household Employees.

    When hiring a contractor or household employee, it’s vital to have them fill out the applicable forms, and withhold the proper amount of taxes throughout the year. A full-time household employee will be classified differently than an independent contractor. Currently, if being paid more than $2,000 a year, they will have Social Security and Medicare taxes (FICA), as well as state and federal income taxes withheld from them while having unemployment insurance taxes paid by the employer. Paying contractors and household employees by check is a convenient and secure way to track their income and file taxes accordingly.
  • Gift Tax Exclusion.

    Currently, when gifting a charity or family member an amount under $14,000 there is no gift tax, but there can be if you are gifting an amount greater than $14,000. Subject to rules established by the I.R.S., gifts in this amount can be in the form of stocks, bonds, etc. This is subject to change, so make sure to look up the annual exclusion and other rules for that year. You certainly don’t want to hand over this amount in cash! Therefore, a check is simply a smart way to give someone such a generous gift.
  • Charitable Donations Tax Deduction.

    For a legitimate charitable tax deduction, you need to donate to a qualified organization. To deduct a donation, you must file Form 1040 and itemize deductions on Schedule A. To claim a deduction donation of $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach I.R.S. Form 8283, Noncash Charitable Contributions, to your return. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser. So hold on to carbon copies and records when writing checks to charities. They can add up fast!

The foregoing is provided “as is” without any warranty for information purposes only, and is not tax, legal, or investment advice. Please consult with your own tax, legal, investment, or other advisors, or the IRS website for advice before making any financial decisions and regarding your application or other use of any the above information.