Making the Most of My Tax Deduction App: Tips for New Users

Posted on October 1, 2024.

Tracking tax deductions can be a time-consuming and complex process, especially for entrepreneurs, freelancers, and small business owners. If you’re new to using tax deduction apps, you might feel unsure about how to get started or maximize the potential savings these apps can offer. 

The good news is, tax deduction apps are designed to make this task much easier, helping you track expenses, find eligible deductions, and simplify your tax preparation. In this guide, we’ll walk you through practical tips for making the most of your tax deduction app and introduce three of the most popular and highly-rated tax deduction apps on the market.

Why Use a Tax Deduction App?

Before we get into the details, let’s understand why tax deduction apps are essential tools:

Save Time: No more manually tracking receipts or expenses. Tax deduction apps automate many tasks, helping you stay organized without added effort.

Maximize Deductions: By accurately recording and categorizing expenses, these apps ensure that you don’t miss any eligible tax deductions, saving you money.

Simplify Tax Season: When it’s time to file your taxes, tax deduction apps help streamline the process by generating reports and providing all your financial data in one place.

#1 Set Up Expense Categories Right Away

Organizing your expenses into categories early will ensure that every transaction is tracked correctly and can be easily linked to specific tax deductions.

How to Do It: Upon downloading your tax deduction app, look for the option to create or modify expense categories.

Common categories include:

  - Office supplies

  - Travel expenses

  - Meals and entertainment (for business purposes)

  - Advertising and marketing

  - Home office expenses

  - Vehicle mileage (for business-related travel)

Tip: Tailor these categories to your specific business or industry. If you work in tech, for example, you might create categories for software expenses or freelance developer payments. Taking the time to set this up correctly from the start will make tracking expenses easier throughout the year.

#2 Turn on Automatic Expense Tracking

Manually entering every transaction is tedious and can lead to missed deductions. By enabling automatic tracking features, your app can link to your credit card or bank account, automatically logging expenses in real-time.

How to Do It: Most tax deduction apps will allow you to sync your bank accounts or credit cards. Find the “Bank Sync” option under settings and follow the steps to securely link your accounts.

Once synced, your app will automatically import transactions and suggest categories for each expense, minimizing the manual work you need to do.

Tip: Periodically review your imported transactions to ensure they’re being categorized correctly. It’s much easier to fix any mistakes immediately than to go back at the end of the year.

#3 Make the Most of Mileage Tracking

If you use your personal vehicle for business purposes, tracking your mileage is essential. Tax deduction apps often include a mileage tracking feature, which allows you to easily log trips without any extra effort.

How to Do It: Use the app’s **Mileage Tracking** feature, often available as an automatic GPS tracker. Turn it on before starting any business-related trip.

For manual entries, record the start and end mileage and let the app calculate the deduction based on the IRS standard mileage rate.

Tip: Keep your vehicle's mileage updated within the app, and make sure you’re distinguishing between personal and business travel. Accurate records ensure you maximize this deduction come tax season.

#4 Use the Receipt Scanner for Expense Proof

The IRS requires you to keep receipts and detailed records for all deductions. Fortunately, most tax deduction apps include a **Receipt Scanner** feature that allows you to digitize and store receipts.

How to Do It: Use your app’s camera feature to take pictures of physical receipts.

The app will automatically store these receipts and categorize them according to the relevant expense category.

If you make online purchases, you can upload digital receipts directly into the app for even easier tracking.

Tip: Make it a habit to scan and upload receipts as soon as you make a purchase, ensuring that nothing gets lost or forgotten. This will save you from scrambling to organize your receipts at the end of the year.

#5 Generate Tax Reports for Hassle-Free Filing

At tax time, having all your data organized and ready to go will make filing your taxes much smoother. Tax deduction apps can generate **Tax Summary Reports** based on your expense data, simplifying the process of preparing your returns.

How to Do It: In the app’s settings, find the **Generate Report** or **Tax Summary** option.

Choose the time period (e.g., quarterly or annually) and export the report in a format that’s easy to share with your accountant or import into tax software.

Tip: Generate reports quarterly to stay on top of your financial health and adjust your tax strategy throughout the year. Waiting until the end of the year could leave you overwhelmed and scrambling to fix mistakes.

#6 Stay Updated on New Tax Law Changes

Tax laws and regulations are constantly changing, and staying informed can help you claim new deductions or avoid outdated methods.

How to Do It: Many tax deduction apps provide **Tax News** or **Updates** features, offering articles and notifications about changes to tax laws. Enable notifications to stay in the loop and ensure you’re not missing out on any new opportunities to save.

Tip: Take some time at the beginning of each quarter to read through any new tax-related updates the app provides. Staying informed will give you an edge in maximizing your deductions.

Highly Rated Tax Deduction Apps to Try

If you haven’t already chosen a tax deduction app, here are three of the most popular and highly rated options that can help you stay organized and maximize your deductions:

1. QuickBooks Self-Employed

Best For: Freelancers, independent contractors, and small business owners.

Key Features: Mileage tracking, receipt scanning, and automatic expense categorization.

QuickBooks Self-Employed is known for its user-friendly interface and seamless integration with TurboTax, making it a top choice for filing taxes efficiently.

2. Expensify

Best For: Individuals and businesses that need to manage both personal and employee expenses.

Key Features: Automatic receipt scanning, expense reporting, and reimbursement features for teams.

Expensify is a powerful tool that’s ideal for tracking expenses on the go, particularly for those who need to manage employee spending as well.

3. Everlance

Best For: Entrepreneurs, small business owners, and freelancers who drive for work.

Key Features: Automatic GPS mileage tracking, receipt capturing, and IRS-compliant expense reports.

Everlance shines for its ease of use in tracking mileage and its affordable pricing, making it a great choice for those who spend a lot of time on the road for business purposes.

Start Maximizing Your Deductions Today

Using a tax deduction app is one of the easiest ways to save time, money, and stress during tax season. By setting up your expense categories early, enabling automatic tracking features, and regularly reviewing your data, you can ensure that every possible deduction is captured. 

Whether you choose QuickBooks Self-Employed, Expensify, or Everlance, the key is consistency. Start tracking your expenses and mileage now, and by the time tax season rolls around, you’ll be well-prepared to file your taxes with confidence and maximize your savings.