Tax deductions

Four most overlooked tax deductions | Business


Who among us wants to pay the IRS more taxes than we need? Most people don’t, but Americans routinely pay too much for failing to receive the tax deductions to which they are entitled. Let’s take a look at the most overlooked opportunities to manage your tax bill.

1. Reinvested Dividends: When your mutual fund pays you a distribution of dividends or capital gains, that income is a taxable event unless the fund is held in a tax-deferred account (such as an IRA). If you’re like most fund owners, you reinvest those payments in additional shares of the fund. The tax trap lurks when you sell your mutual fund. Failure to reinvest the amounts reinvested back into the cost base of the investment may result in double taxation of those dividends.

2. Out-of-Pocket Charity: It’s not just cash donations that are deductible. If you donate goods or use your personal car for charity, these are potential tax deductions. Just make sure you get a receipt for anything over $ 250.

3. State Taxes: Did you owe state taxes when you filed your income tax returns for the previous year? If you did, remember to include this payment as a tax deduction on your tax return for the current year. The Tax Cuts and Jobs Act of 2017 capped the national and local tax deduction at $ 10,000.

4. Health insurance premiums: if you are self-employed (and not covered by an employer plan or your spouse’s plan), you may be eligible for the deduction of premiums paid for parts B and D. Medicare, Medigap Insurance, and the Medicare Advantage Plan. This deduction is available whether or not you itemize the deductions.

To make sure you minimize your tax liability, work with your tax preparer. If you would like a review of your total financial portfolio, call us for a free consultation.