10 Aug I missed a tax deduction. Help!
Q. I signed on for a financial newsletter which also provided investment advice. I paid $10,595 for this five-year subscription in September 2014. After my taxes were done for 2014, I was told that I could have deducted the cost and that I should do an amended return. Is this true? I also paid about $3,300 to Fidelity in 2014 to manage my money.
A. It can be painful to realize you’ve overlooked a tax deduction, but whether or not it’s worth amending a tax return will depend.
When you itemize your deductions on your tax return, you can lump lots of different types of expenses as miscellaneous itemized deductions on line 23 of Schedule A, said Cynthia Fusillo, a certified public accountant with Lassus Wherley in New Providence.
She said these expenses in aggregate must exceed 2 percent of your adjusted gross income in order to be deductible.
The cost for a financial newsletter definitely qualifies as a deduction, she said.
“I would caution you, though, that the costs should not be excessive in comparison to the taxable income generated by your portfolio,” she said, noting that if your portfolio is solely invested in tax-exempt securities, no deduction is allowed.
To take it as a deduction, you should be relying on the newsletter to guide your investment decisions. It sounds like you replaced your financial advisor — Fidelity — with the newsletter, so it seems like you qualify.
Also note that miscellaneous itemized deductions are disallowed for Alternative Minimum Tax (AMT) purposes, so be sure to review your situation for any AMT ramifications, Fusillo said.
So, you certainly may and should amend your 2014 return to include the cost of the newsletter that was inadvertently omitted from your originally filed return.
Fusillo said if you filed your 2014 return on time — by April 15, 2015 — you have until April 15, 2018 to file your amendment.
“That date is longer for extended returns. In other words if for example you filed your original return on June 1, 2015 for example, you would have until June 1, 2018 to amend,” she said. “Make sure that when you add the cost of the newsletter to your other miscellaneous itemized deductions that they exceed 2 percent of your adjusted gross income and you’ll be good to go.”
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This story was first posted in August 2015.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.