Insights + Resources

Six Most Overlooked Tax Deductions

Jun 19, 2019

Tax Written on Paper
Deductions you do not want to miss

Who among us wants to pay the Internal Revenue Service more taxes than we have to? While few may raise their hands to voluntarily pay more taxes, Americans regularly overpay because they fail to take tax deductions for which they are eligible. Are you one of them? Let’s take a quick look at the six most overlooked opportunities to manage your tax bill.

Reinvested Dividends

When your mutual fund pays you a dividend or capital gains distribution, that income is a taxable event (unless the fund is held in a tax-deferred account, like an IRA). If you’re like most fund owners, you’ll reinvest these payments in additional shares of the fund. The tax trap lurks when you sell
your mutual fund. If you fail to add the additional investment amounts back into the investment’s cost basis, it can result in double taxation of those dividends.1,2

Self-Employment Taxes

If you are a sole proprietor, you can claim 50% of what you pay in self-employment tax, as an income tax deduction. This only makes sense, since you are actually paying both the employee and employer share of Social Security and Medicare taxes at your business.3

Out-of-Pocket Charity

It’s not just cash donations that are deductible. Any time you donate goods or use your personal car for charitable work, these are potential tax deductions. Just be sure to get a receipt for any amount over $250.4

State Taxes

Did you owe state taxes on your previous year’s tax returns? If you did, don’t forget to include this payment as a tax deduction on your current year’s tax return. The Tax Cuts and Jobs Act of 2017 limits state and local tax deductions at $10,000 cap.4

Medicare Premiums

If you are self-employed (and not covered by an employer plan or your spouse’s plan), you may be eligible to deduct premiums paid for Medicare Parts B and D, Medigap insurance, and Medicare Advantage plans. This deduction is available regardless of whether you itemize deductions.4

Income in Respect of a Decedent

If you inherit an IRA or pension, you may be able to deduct any estate tax paid by the IRA owner from the taxes due on the withdrawals you take from the account. Be sure to check with a tax professional on your specific situation.

The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your Charlotte NC financial professional. Read it carefully before you invest or send money.

Citations.

1 – thebalance.com/how-to-avoid-the-double-taxation-of-mutual-funds-2466698 [8/19/18]

2 – kiplinger.com/article/taxes/T055-C032-S014-tax-rules-on-10-retirement-accounts-or-investments.html [3/21/18]

3 – turbotax.intuit.com/tax-tips/self-employment-taxes/the-self-employment-tax/L8xXjolB4 [12/13/18]

4 – kiplinger.com/slideshow/taxes/T054-S001-most-overlooked-tax-deductions-2018/index.html [11/20/18]

5 – investopedia.com/terms/i/income_respectof_decedent.asp [1/30/18]

Tags: ,

More Insights

Jul 17, 2019

Many people plan their estates diligently, with input from legal, tax, and financial professionals. Others plan earnestly but make mistakes that can potentially affect both the transfer and destiny of family wealth. Here are some common and not-so-common errors to avoid.

Jul 15, 2019

According to Giving USA 2018, Americans gave an estimated $410.02 billion to charity in 2017. That’s the first time that the amount has totaled more that $400 billion in the history of the report. Americans give to charity for two main reasons: to support a cause or organization they care about or to leave a … Continue reading “Trends in Charitable Giving”

Jul 12, 2019

Social Security will be a critical component of your financial strategy in retirement, so before you begin taking it, you should consider three important questions. The answers may affect whether you make the most of this retirement income source.

Jul 10, 2019

Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover and where they come from. There are two components of original Medicare, Parts A & B. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help … Continue reading “The A, B, C, & D of Medicare”

Jul 8, 2019

Does your vision of retirement align with the facts? Here are some noteworthy financial and lifestyle facts about life after 50 that might surprise you. Up to 85% of a retiree’s Social Security income can be taxed. Some retirees are taken aback when they discover this. In addition to the Internal Revenue Service, 13 states … Continue reading “A Retirement Fact Sheet”

Insights + Resources >
We are preparing the questionnaire, please let us know through the contact page if you want to be notified when it's available.
Thank you.

Epic IMPACT Quarterly Newsletter

To Receive Our Quarterly Impact Newsletter:

 
Your privacy is important to us. We will not rent or sell your information.

Epic Market Commentaries

To Receive Our Market and Economic Commentaries

Your privacy is important to us. We will not rent or sell your information.

7 Steps for Investing with Impact

 
Your privacy is important to us. We will not rent or sell your information.