Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Avoid these 10 traps with your taxable account: A taxable account offers liquidity that clients can't find in IRAs and other retirement plans, according to Morningstar. Clients can minimize or circumvent the tax bite from these investments by avoiding 10 possible traps. -- Morningstar
Crazy sounding tax deductions that are still legit: Taxpayers have claimed some unusual expenses that were dismissed by the IRS, but later upheld in Tax Court, according to Forbes. Some of these unusual tax deductions were the cosmetic surgery costs claimed by an exotic dancer, moving expenses for a pet, and the cost of food for wild cats to ward off rats in a junkyard. Tax court also approved child care expenses as charitable contributions, beer as a business expense, and landscaping costs as home office deductions. -- Forbes
What to know when deducting charitable donations: Charitable tax deductions are limited to a certain percentage of a client's adjusted gross income, according to MarketWatch. Clients can carry over the amount of contributions that exceeds their AGI limit over the next five years and deduct the amount from their taxable income. Clients need to produce the required documentation so they can deduct their cash and non-cash donations to charity. -- MarketWatch
Cost basis and your taxes -- Brokerage firms assist, but filing and record-keeping are in your client's court: Clients need to learn the cost basis of their investments to determine their impact on taxes, according to the Motley Fool. The cost basis of bond and stock investments usually covers the amount paid to buy these securities, reinvestment of dividends or capital gains distributions, and commissions and other fees. Investors have to use Form 8949 to report the cost basis of their investments to the IRS. -- Motley Fool
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