How Many Tax Deductions Are in Your Portfolio?
How many tax deductions did you take last year?
If you answered “just one,” don’t be embarrassed. According to the most recent IRS data, a whopping 68.5% of U.S. households took the standard deduction instead of itemizing in 2013.
Laziness is the norm when it comes to tax deductions. But it really shouldn’t be - especially for investors. (When it comes to actual investing, that’s a different story...) Your portfolio is full of lucrative deductions, if you know where to look.
Let’s go over some of the most useful yet obscure tax deductions you can take from your portfolio.
Legal, Accounting and Advisory Fees
You pay taxes on your realized capital gains. So why would you have to pay taxes on the money you spent to make those gains happen?
You don’t. Our tax code considers that double taxation, so you can deduct any expenses you incur from managing your portfolio.
As you may know, an investor can end up spending a lot of money just to make sure their investments are in good condition. Have you talked to a lawyer or accountant about your portfolio recently? Those fees are tax-deductible.
But that’s not the best part. You can also deduct any fees you pay to investment advisors. And that includes subscriptions to financial publications.
Shameless plug time... If you pay for Investment U Plus or any of The Oxford Club’s other premium newsletters and services (all available here in the Investment U Bookstore), you can use the cost as a tax deduction.
That’s right. We give you investment education, recommendations and insights - all tax-free.
Tools of the Trade
You don’t need any equipment to manage your portfolio well - just your brain. But plenty of investors do make purchases in the name of portfolio management. And many of those purchases are tax deductible, too.
If you pay for any software or online services to help you manage your portfolio, those costs can be tax deductions. It’s the same principle that allows you to deduct your finance-related subscription fees. You’re already paying taxes on your capital gains or retirement account withdraws. So anything you buy to help you make those gains is tax-exempt.
In the same vein, you can also deduct safety deposit box rental costs if you use the box to store investment-related documents. So if you’re an old-school investor who likes physical certificates of ownership, you can deduct your storage and security costs.
At last count, our nation’s tax code is more than 10 million words long. That’s more than 20 times the length of Stephen King’s It. This article just scratches the surface of the deductions and loopholes available to you.
There’s one technique in particular that we didn’t cover here, because we already wrote another article about it. Tax-loss harvesting is a variation on the same notorious trick President Trump used to legally dodge federal income taxes for decades.
If you want to learn about more lucrative tax deductions, check out The Oxford Club’s report here.
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