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The Most Overlooked Tax Deductions and Other Helpful Tax Tips

The Most Overlooked Tax Deductions and Other Helpful Tax Tips

March 13, 2024

As we are well into tax season, it’s the perfect time to discuss important tax deductions that you may be eligible for. Take a look below at the five most overlooked opportunities to manage your tax bill as well as some other helpful tax tips.

1. 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 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 reinvested amounts back into the investment’s cost basis, it can result in double taxation of those dividends.1
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 financial professional. Read it carefully before you invest or send money.

2. 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 $250.2

3. State Taxes: Did you owe state taxes when you filed 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. There is currently a $10,000 cap on the state and local tax deduction.3

4. Medicare Premiums: You may be able to deduct unreimbursed medical and dental premiums, co-payments, deductibles, and other medical expenses to the extent that the costs exceed 7.5% of your adjusted gross income. This includes most Medicare premiums.4

5. Income in Respect of a Decedent: If you’ve inherited 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 inherited account.5

Our team of tax professionals also put together another list of other lesser known, but very important tax tips.

  • If you have a Sole Proprietorship or an LLC that files a Sch C, you can take advantage of Family Wealth Planning. If your child is 17 years old or younger, the first $13,850 (for 2023) of wages paid to them is exempt from Social Security, Medicare and FUTA taxes. This can then be used to fund a Roth IRA or other investment vehicle for your children. It helps distribute income to your children where it will be taxed at a significantly lower tax rate than the taxpayer and keeps the funds within the family (lowering potential estimates needed to the IRS).


  • The new energy credit rules for 2023 have been one of the better improvements the IRS has made to an existing tax rule. The new rules allow for taxpayers of all ages to benefit from necessary home improvements at a larger scale, where in the past the rules were very limited and left the taxpayers feeling that the benefit was not worth the cost. 

 

  • Understanding the impact of the 2017 Tax Cuts and Jobs Act on standard deductions is crucial. Many taxpayers are still adjusting to the benefits of the increased standard deduction. Even though you aren’t itemizing, you are still getting a more beneficial deduction.

 

  • For businesses who were able to take advantage of COVID Relief (PPP Loan, EIDL Loan, and ERC), it’s important to understand the basic facts of these programs. Some of the most common questions we get are
    • "Is this money taxable?"
    • "How can I use this money?"
    • "Do I have to pay this money back?"

These rules have changed so frequently and can contain language that is difficult for business owners to understand fully.

At Zappitelli Financial, we understand all of the complex tax rules and are here to walk you through any and all of these important considerations. Give our team a call today, or visit zappitelliwealthadvisors.com for more information.

Sources:

  1. Investopedia.com, January 11, 2024
    2. IRS.gov, 2024
    3. IRS.gov, 2024
    4. IRS.gov, 2024
    5. IRS.gov, 2024. In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). 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. You may continue to contribute to a Traditional IRA past age 70½ as long as you meet the earned-income requirement.