If you’re like most Americans, you’re already thinking of all the possible ways to add dollars and cents to your tax return starting in April.
One thing many workers overlook is the breakdown. It is done by freelancers and those who run their own businesses regularly … but it can save a lot of money for every type of worker. When itemizing, you can subtract non-federal taxes from your federal income. The more you can deduct, the less you pay.
Did you know that you can deduct state and local income tax from your federal tax returns? That includes sales taxes, real estate taxes, property taxes, and investment taxes. Beyond that, taxpayers in California, New Jersey, New York, Rhode Island, and Washington can take advantage of state deductions for disability and compensation. If you are interested in learning more about the deductions you can make, speak with a certified financial planner.
Schedule A provides a blank line for “other” taxes, where you can include the 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 present it correctly.
While you get excited about all the deductions you didn’t know you could make, remember there are many things you can’t deduct from your federal taxes, including Social Security, federal estate taxes, car registration, and license fees. If you’re not 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 excellent money managers.