Top 5 Tax Write-offs for Investors Waterville ME

Tax season is slowly drawing nearer, and investors would be wise to begin considering which federal tax deductions will be the most beneficial for them when the time comes to fill out those returns. NuWire compiled a list of tax deductions specifically tailored for investors to help begin the process.

Here are our top tax write-offs for 2008:

1. Miscellaneous itemized deductions for investors.

As long as these expenses were incurred while pursuing investment activities for the purpose of gaining profit, investment-related expenses are deductible. Investment-like activities that are pursued for hobby purposes, however, would not have deductible expenses.

“If I’m raising horses as a hobby, and not an investment to make a profit, then my expenses would not be deductible,” Bill Elliott, managing international tax partner at Mahoney Cohen & Co. in New York, said. “If I have a profit motive, then generally...anything that would help me with regard to making these investment decisions...are all deductible.”

All manner of expenses can be deducted as investment-related. “Any of the tools that you use...can have deductions built into them,” Greg Rosica, tax partner in Ernst & Young’s Personal Financial Services Practice and co-author of The Ernst & Young Tax Guide 2008, said.

Expenses for investment tools, including safe deposit boxes, can be deducted That subscription to The Wall Street Journal? Write it off. Advisory fees? Write those off, too. How about the fees for that safe deposit box with all the stock certificates in it? Write them off. It’s possible that investors could even go so far as to write off a phone line or a computer used solely for investment purposes, but something like that could be harder, according to Rosica.

“You have to be careful because chances are you’re not just using [a computer] for investment purposes, you are doing a lot of other things on it,” Rosica said. “You have to consult with your advisor as to whether that would be an appropriate deduction.”

2. Qualified retirement plan

Contributions to a qualified individual retirement account (IRA) are deductible up to $4,000 per year per person, Elliott said. The amount in the IRA, including earnings, is not typically taxed until earnings are distributed, according to IRS Topic 451. This is an opportunity still available to investors: The deadline for IRA contributions is the due date of the return, not including extensions, according to the IRS.

“Several types of plans exist which qualify for the tax advantages of a qualified retirement plan—a current deduction from income to the employer for contributions to the plan, tax-free buildup of plan investments and the deferral of income (augmented by investment earnings) to the employees until distribution of the funds,” Ryan L. Losi, executive vice president and director of business deve...

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