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

Sep 18, 2019

Do you have an extra $33,000 to $100,000 to spare this year? How about next year, and the year after that? Your answer to these questions is probably “no.” What could possibly cost so much? Eldercare.  According to the AARP Public Policy Institute, a year of in-home care for a senior costs roughly $33,000. A year … Continue reading “Your Extended Care Strategy”

Sep 16, 2019

“Why is my portfolio underperforming the market?” This question may be on your mind. It is a question that investors sometimes ask after stocks shatter records or return exceptionally well in a quarter. The short answer is that even when Wall Street rallies, international markets and intermediate and long-term bonds may underperform and exert a … Continue reading “Your Diversified Portfolio vs. the S&P 500”

Sep 13, 2019

During your accumulation years, you may have categorized your risk as “conservative,” “moderate,” or “aggressive,” and that guided how your portfolio was built. Maybe you concerned yourself with finding the “best-performing funds,” even though you knew past performance does not guarantee future results. What occurs with many retirees is a change in mindset – it’s … Continue reading “Your Changing Definition of Risk in Retirement”

Sep 11, 2019

Addressing the potential threat of long-term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy. The U.S. Department of Health and Human Services estimates that 69% of people over age 65 can expect to need extended care services at some point in their lives. So, understanding … Continue reading “Understanding Long-Term Care”

Sep 9, 2019

The American family with a child born today can expect to spend about $233,610 to raise that child to the age of 18. And if you’ve already traded that supercharged convertible dream for a minivan, you can expect your little one’s college education to cost as much as $198,000. But before you throw your hands … Continue reading “Getting a Head Start on College Savings”

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.