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Little Known Tax Deductions And Missed Items:
- Only file a Short Form once you Know you can't itemize. Many taxpayers assume they cannot itemize their deductions when in fact, they can...
- Recordkeeping:
Be sure to adjust the cost basis of your stock portfolio for reinvested dividends...This is especially costly on mutual funds since there can be a lot of capital gains even though the value of the stock has lost money... Adjust the cost basis for the reinvested dividends to make sure you get the correct figure upon sale of the stock.
If you have a Non Deductible IRA...Be sure you are keeping track of the cost basis on it and include Form 8606 in your Federal Annually.
Business Expenses: Items such as Entertainment or Travel are often overlooked. Be sure you keep copies of Expenses, Charge Receipts or Airline Tickets so that you don't overpay your Taxes! Failure to keep adequate Business Records means you pay too much!
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File An Amended Tax Return:
If you find out that you missed a Write Off on a prior years Tax Return, you can correct the original return up to 3 years from the due date and get your lost refund by using Form 1040X.
- Avoid Tax Penalties:
There are substantial Underpayment Penalties which can be avoided...Pay Liabilities prior to Tax Year End.
- Move Interest from Charge Cards to Home Equity Loans making Interest Tax Deductible.
- Margin Interest paid to your Stock Broker may be Tax Deductible as an Itemized Deduction.
- Interest Paid on Municipal Bonds is Fully Tax Free.
- Interest Paid on Federal Obligations such as Savings Bonds is Tax Free on the State Return.
- Securities which become "Worthless" are a Write Off in the year they are determined to be worthless.
- Investment Expenses Are A Write Off:
Legal and Professional Fees To Produce Taxable Income
Fees For Investment Advice
Tax Preparation Fees
Books, Magazines other Investment Journals
Custodial Fees for IRA's and Keogh Plans
Investment related Travel Expenses
- Special Write Offs are available for Stock Losses in "S" Corporations.
- Special Tax Credits for Moderate to Lower Income Investments in Pension Plans.
- Sell your Home Tax Free if you owned it at least 2 out of the past 5 years personally (Max. $250,000 Single $500,000 MFJ)
- Self Employment Taxpayers collecting Social Security may reduce the "Payback" of a Social Security by hiring their spouse to reduce the Net Profit prior to age 65.
- Set up an Exclusive place to work "At Home" as a deductible home office if you do a specific activity not available at your place of employment.
- Move to a ROTH from a Traditional IRA since your IRA may have lost money in the down market making the ROTH totally Tax Free in the future.
- Borrow money against your own 401K Plan for emergencies. The loan is Tax Free and you pay yourself back rather than the bank.
- Self Employed Taxpayers should consider incorporating for additional Tax Breaks and Liability Protection.
- Use new "Catch Up Provisions" on your Pension, IRA or Other Retirement Plan if over age 49 to maximize your Pension.
- Medical Expense Write Offs Often Overlooked:
Acupuncture, Addiction Therapy, Contact Lens Insurance, Dentures, Dust-Free Room (For Allergy Sufferer), Elastic Stockings ordered by a doctor, Extra rent of room for nurse, Legal Fees for commitment of Mentally Ill spouse, Maintenance costs for equipment used to relieve medical problem, Sex counseling by Psychiatrist for husband and wife, Special Diets for Treatment of Specific Condition in excess of normal diet, Trained cat for Hearing Impaired owner to Unusual Sounds, Wig to alleviate Mental Stress caused by Hair Loss.
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