Last-Minute Tax Deductions for Investors

By Jason Van Steenwyk

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We’re down to the wire! Are you getting every last tax advantage you can out of your forex or other investment trading activity?

Ask yourself these questions:

  • Did you contribute what you could to an IRA or Roth IRA? You have until April 15th to contribute for tax year 2013. If you choose a Roth IRA, you won’t get a current year deduction. But if you choose a traditional IRA you can take the deduction as an “above the line” adjustment to income. You don’t have to itemize, and you don’t have to worry about that pesky 2 percent of AGI threshold that normally applies to Schedule A miscellaneous itemized deductions.
  • Did you deduct contributions made to a Simplified Employee Pension Plan (SEP) or Solo 401(k)? Do so. SEP contributions are an above the line adjustment to income on your personal plan. Solo 401(k) accounting is a little different, but both are excellent deductions to be taking. You want to nab them if you contributed.
  • Computers and other equipment. Did you take a depreciation deduction on your computer? How about your trading software?
  • Did you contribute capital to a partnership? What about property converted to business use, like a computer or office furniture? If you did, you may be able to deduct the fair market value at the time of deduction, or the actual cost, whichever is less. This isn’t an all-at-once deduction – you must depreciate the property over its useful life.
  • Did you deduct attorney and accountant fees? Not personal ones, but ones that specifically apply to earning taxable income?
  • Did you pay fees to investment companies? Commissions aren’t directly deductible, but monthly fees, subscriptions and fees for service are. Do you have statement fees? (Pro-tip: Try to pay any retirement account fees with after tax dollars from OUTSIDE retirement accounts. Otherwise you won’t be able to deduct fees.
  • Did you deduct the cost of medical insurance? You generally can if you’re self-employed, don’t have access to your spouse’s employer plan, and it’s the self-employed individuals’ name on the policy. On top of that, if you selected a qualified high-deductible health plan, you may be able to deduct contributions you made to an HSA, as well.
  • Did you contribute to a health savings account? If you didn’t, it’s not too late. You have until April 15th, 2014 to make a tax deductible contribution to a health savings account for tax year 2013. This is an above-the-line adjustment to income on your Form 1040. You don’t have to itemize.
  • Do you have long term care insurance? You can deduct any long-term care insurance you paid for yourself or your spouse or both. Limits apply based on age, but most standard tax-qualified LTCi policies will work for this purpose and get you the deduction.
  • Did you deduct margin interest expense? It’s an investment expense, so you should be able to deduct it. However, overall investment expenses shouldn’t exceed 2 percent of your AGI.
  • Did you write off all your subscriptions? You can deduct subscription costs to the Wall Street Journal, any education other memberships you join via Winners Edge Trading, newsletter subscriptions, monitoring and intelligence services, and any other subscriptions that are exclusively related to producing an income. You can even write off your cable subscription if the only thing you watch is Bloomberg News, C-SPAN and Squawk Box!
  • Milage. Did you deduct mileage to every meeting with your accountant or attorney or other advisor regarding business activities? Did you deduct mileage to seminars and classes? You can’t generally deduct expenses related to personal investment seminars. You can deduct 56.5 cents per mile in 2013. That adds up fast. See IRS Publication 463 for more.
  • Travel, Meal and Entertainment Expenses. Did you deduct meal tabs you picked up for business purposes? Even coffee? That adds up fast, too. You can only claim 50 percent of the amount you spend on food and beverage as an expense. The IRS figures you were going to eat half of that bill, anyway, and considers the rest an emergency expense.
  • Cell phone usage. You can deduct a prorated portion of your bill based on how often you use it for business.
  • Community organizations. You can deduct dues you pay to community service groups like Kiwanis or Shriner’s or the VFW.
  • Got a home office? Deduct for the business use of your home. It doesn’t have to be a separate room. It can be a desk in a corner of a room. But the space must be exclusively devoted to business use. You can’t also use it as a gaming center.
  • Business gifts. You can deduct up to $25 per recipient per year.
  • Education benefits. You can deduct for education related to investment, as long as the coursework or program you’re in doesn’t qualify you for a new profession. So taking FOREX classes or economics classes would be deductible. But enrolling in a Certified Financial Planner course would be a personal expense – unless you were already a financial planner! Note: Owner employees of their own corporations can grant themselves and their workers educational benefits of up to $5,250 per year, tax-deductible.

A few things you can’t deduct… 

Expenses related to income that isn’t taxable. For example, if you’re paying money to someone to help you invest in municipal bonds, the fees you pay for that purpose are probably not tax deductible.

Expenses to investment seminars (unless you qualify for trader status).

Can’t get it together by April 15th? No problem. File for an automatic extension. But you still have to make your best guess about taxes due and pay that estimated amount. Failure to do so will result in penalties and interest on any underpayments.

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