The IRS has strict substantiation rules in 2025 requiring taxpayers to keep proper receipts and proof for charitable contributions, medical expenses, and state and local taxes (SALT). Failing to comply could mean losing valuable deductions during an IRS audit.
Become Our Featured Tax Expert.
This premium ad space is reserved for one tax professional. Put your firm in the spotlight and reach qualified USA leads directly.
To claim this exclusive spot, contact us at [email protected].
Why Substantiation Rules Matter
The IRS requires documentation to verify itemized deductions. If you claim a deduction but don’t have proper proof, it may be disallowed. The rules are especially strict for charity, medical, and SALT deductions—areas the IRS scrutinizes closely in audits.
Charitable Contributions
- Cash Donations under $250: Bank statements, payroll deduction records, or canceled checks are sufficient.
- Cash Donations $250 or More: Requires a written acknowledgment from the charity, including date, amount, and statement of goods/services received.
- Non-Cash Donations: Keep receipts, detailed descriptions, and in some cases, a qualified appraisal.
- Special Rule in 2025: Donations made via crowdfunding platforms must have proof of qualified charitable status.
Medical Expenses
Medical deductions are allowed only for unreimbursed costs that exceed 7.5% of AGI. Documentation required includes:
- Receipts and invoices for hospital visits, prescriptions, and medical equipment.
- Travel logs for medical-related transportation.
- Doctor’s prescriptions for capital expenditures like home improvements.
- Insurance statements showing amounts not reimbursed.
State and Local Taxes (SALT)
Taxpayers in 2025 can deduct up to $10,000 ($5,000 if married filing separately) in state and local taxes. To substantiate:
- W-2 forms showing state tax withholding.
- Property tax bills and proof of payment.
- Receipts for estimated tax payments.
- Copies of prior state income tax returns.
Digital vs. Paper Proof
The IRS accepts both digital and paper documentation as long as it is legible and clearly shows the required details. Scanned receipts, electronic bank statements, and cloud-stored files are valid for substantiation in 2025.
How Long to Keep Records
- At least 3 years from the filing date of your tax return.
- 6 years if substantial income is omitted.
- Indefinitely if a fraudulent or unfiled return is involved.
Audit Risk Areas
IRS data shows higher scrutiny in these categories:
- Large charitable deductions compared to income.
- High medical claims relative to AGI.
- Maximum $10,000 SALT deduction claims.
Key Takeaways
- Always keep receipts, statements, and acknowledgment letters for deductions.
- Organize documents by category for quicker audit response.
- Both digital and paper proofs are acceptable if clear.
- Follow IRS retention timelines to stay compliant.
