Wednesday, August 15, 2007

Investment Newsletters

Craig asks:
I was told that my investment newsletter services tax-deductible, but I don't know
where to put them on my tax return? Do I spread the cost over the investments I bought based on the news services' advice?

My reply:

The cost of your investment newsletters are considered a miscellaneous itemized deduction on Schedule A, subject to the 2% of Adjusted Gross Income AGI exclusion. The cost of these newsletters does not affect your basis in your investments.

You can read more about this in IRS Publication 550.

Important note: Many tax deductible expenses do not end up providing a tax deduction.

Salespeople will rightfully tell you when something they are selling MAY be tax deductible, only they always seem to say it as it definitely IS deductible and failed to mention the various exclusions that apply.

The most painful of these is usually related to a home purchase that they have been told will result in a big annual tax savings, which for many people does not. It is always a mistake to purchase something because you believe it will provide you with a tax deduction without first asking your tax adviser if it is true in your case.

Best wishes,

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