If you have been investing in an IRA, a 401k, retirement annuities, or a college savings plan than you most likely already know about the tax breaks that you can get for these investments. But are you aware of the tax breaks that are possible for other investments?
When it comes to tax time it is important that you are taking advantage of all the itemized deductions that you can. Remember, we all have a silent partner when it comes to our taxable investments. That partner is Uncle Sam and no matter what you do he is going to take some of your investment income and capital gains. The good news is that you don’t have to give him everything you’ve earned and there are many special tax breaks Uncle Sam offers too.
Make sure you are getting all of the tax breaks that you can qualify for.
First things first; talk to your tax professional. Not only is there a lot to keep track of when it comes to tax time, but the laws, rules, and regulations change every year. Your tax professional’s job is to stay on top of those rules and help prevent you from making any tax mistakes.
Although they need to know what your options are, you should have a good idea of what tax breaks are possible to get you started.
• Investment Related Miscellaneous Itemized Deductions – Basically this means itemized deductions. There are many of these deductions that you are probably already taking that have nothing to do with investments. These deductions can be for things like tax preparation costs, union dues, job hunting expenses, and so on. But there are also many investment related expenses that you can add to this list. These are costs like:
-Fees for investment advice or publications
-IRA custodial fees
-Safe deposit box rental, if you use the box to store investment related documents
-Charges for automatic investment services
-Costs to replace lost certificates
• Investment Interest Expenses – If you have borrowed money to purchase investments you can write off those expenses. Yes, this means that you can write off the loan money and the interest. This is a specialized deduction and not everyone will qualify for it.
• Capital Losses – If you are paying high capital gains you can use capital losses to offset. In order to qualify for this offset your capital losses have to exceed your capital gains for the year. If this is the case you can also use this to offset any ordinary income you have as well. The good news is that you can carry forward these offset gains into future years.
• Full Time Investor – If you work as an investor full time, or if the majority of your personal income is from investing, you could deduct work space, computer equipment, and even your internet connection. You have to spend time working on your investments every day in order for this to count.
Again, with any of these potential tax saving tips it’s important that you talk to your tax professional first. Better to check before hand than have to deal with a painful and lengthy audit down the road. You might also want to consider consulting with an investment accountant, they will have the skinny on all of the most plausible and necessary deductions that a tax professional from one of the box stores might not be aware of.
These are just of the few more obvious deduction possibilities. There are many, many more. Keep on top of the best deductions for your income and you will insure that the person who gets to keep the most of your hard earned money is you.