I assume many of your clients took advantage of forced time indoors from record snowfalls this winter to get an early start on their taxes. Surely, I’m not the only one who delights in organizing my tax information and paperwork at the start of the New Year?
For those clients who have yet to scan their W-2s and 1099s, here are a few tips that will make the road to April 15 less painful and will potentially save them money.
1. Tax Loss Harvesting
Last December, I wrote a blog post for ThinkAdvisor focusing on tax loss harvesting trades. For those who need a quick recap: loss harvesting occurs when investors sell securities that have experienced a loss to offset other gains in their portfolio. After losses are netted against gains, the IRS limits the losses that can be set against ordinary income to $3,000 a year. Fortunately, investors can store these losses for future tax years. Of course the onus is on the taxpayer (or their advisor) to remember previous losses and document them appropriately for current and future tax years.
2. Moving Deduction
Unemployment rates have fallen since the worst days of the Great Recession, but generous benefits and relocation packages have yet to return to their prerecession glory days. This means that while workers have had to widen their employment radius, they are not always being compensated for their willingness to move. Fortunately, workers can recoup some of their losses by claiming unreimbursed job-search and moving-related expenses should their new place of employment be 50 miles or more from their old home.
3. Unreimbursed Employer Expenses
Another unfortunate legacy of the Great Recession: employees not always being reimbursed for costs associated with doing business. For business-related costs, you can deduct up to 2% of your adjusted gross income. A more comprehensive list of the deductible expenses can be found on the IRS website, including such items as: loans made to employers, education costs, uniforms and costs related to maintaining a home office.