If you’re like most Americans, you’re already thinking of all the possible ways to add dollars and cents to your tax return in April.
One thing that many workers overlook is the breakdown. Freelancers and those who run their own businesses do it regularly…but it can save a lot of money for every type of worker. When you itemize, you can subtract non-federal taxes from your federal income. The more you can deduct, the less you will pay.
Did you know that you can deduct state and local income tax from your federal tax returns? That includes sales tax, real estate tax, property tax, and investment taxes. Beyond that, taxpayers in California, New Jersey, New York, Rhode Island and Washington can take advantage of state disability and compensation deductions. If you’re interested in learning more about the deductions you can take, talk to a certified financial planner.
Schedule A provides a blank line for “other” taxes, where you can include foreign income taxes that many shareholders pay on their mutual funds whose holdings include foreign investments. Your fund manager should send you the necessary documentation, and your investment advisor can help you understand and file it correctly.
As you get excited about all the deductions you didn’t know you could take, remember there are a lot of things you can’t deduct from your federal taxes, including Social Security, federal estate taxes, car registration, and license fees. If you’re sure what counts and what doesn’t, ask your financial advisor. Any good wealth advisor would do what is best for you: get paid when you do. Good money management pays off when you have great money managers.
