Who among us wants to pay the IRS more taxes than we have to?¹
While few may raise their hands, Americans regularly overpay because they fail to take tax deductions for which they are eligible. Let’s take a quick look at the four most overlooked opportunities to manage your tax bill.
- Reinvested Dividends: When your investment pays you a dividend or capital gains distribution that income is a taxable event (unless the investment is held in a tax-deferred account, like an IRA). If you’re like most investors, you reinvest these payments in additional shares of the investment. The tax trap lurks when you sell your investment. If you fail to add the reinvested amounts back into the investment’s cost basis, it can result in double taxation of those dividends.²
- Job Hunting Costs: A tough job market may mean you are looking far and wide for employment. The costs of that search—transportation, food and lodging for overnight stays, cab fares, personal car use, and even printing resumes—may be considered tax-deductible expenses, provided the search is not for your first job.
- Out-of-Pocket Charity: It’s not just cash donations that are deductible. If 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.
- State Taxes: Did you owe state taxes at the time of filing of 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 information in this material is not intended as tax or legal advice. Julia M. Carlson is a registered Principal with, and securities are offered through, LPL Financial. Member FINRA/SIPC.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
- 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.
- Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.