1. Student Loan Interest paid by mom and dad:  If parents pay back the child’s student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt.  So as long as the child is no longer claimed as a dependent, he or she can deduct up to $2500 of student loan interest paid by mom and dad each year.  And the student does not have to itemize to use this money saver.

(Please note that mom and dad cannot claim the interest deduction, even though they pay the bill, because they are not actually liable for the debt.)

2. State Sales Tax:  Many of our clients live in states that do not impose a state income tax.  Congress offers item misers the choice between deducting the state income taxes or state sales taxes they paid.  You choose whichever saves you more money.  So if your state does not have an income tax, the sales tax write off is clearly the way to go.

3. Out-of-pocket charitable deductions:  Like many of you, Resonate is absolutely committed to both corporate and personal philanthropy.  “Little things” that we do can often go unnoticed.  For example, if you prepare a casserole or dessert for your church potluck, provide food for a not- for- profit soup kitchen, contribute stamps for a school’s fundraising mailing, or have other out-of-pocket costs incurred while doings good work for charity, keep your receipts.  These “little things” actually qualify as charitable income tax deductions.  (If your contributions total more than $250, you’ll also need an acknowledgment from the charity documenting the support that you provided.)

Also remember that you can deduct $0.14 per mile plus parking and tolls paid for any philanthropic/volunteer work.

4. Deduction of Medicare Premiums for the Self-Employed:  This deduction is available whether or not you itemize.  Further, it is not subject to the 10% adjusted gross income test that applies to itemized medical expenses for those 65 and older (changed from 7.5% as of 1-1-17).  So, if you continue to run your own business after qualifying for Medicare, you can deduct the premiums for Medicare part B and part D plus the cost of supplemental Medicare policies or the cost of a Medicare advantage plan.

5. Reinvested Dividends:  Many of our investors choose to automatically reinvest their dividends, so that they can purchase extra shares.  Remember that each reinvestment increases your cost basis – just as if you had written a check yourself.  When you decide to sell some shares, it is very important to be sure to include the value of your reinvested dividends in your cost basis.

6. Refinancing points:  Most people know that you get to deduct the points paid to get your first mortgage in a lump sum.

When you refinance, though, you have to deduct the points on the new loan over the life of that loan.  That means if you take out a 30 year mortgage, you can deduct 1/30th of the points per year.

If you happen to sell the house or refinance before the existing mortgage is paid off, then you can deduct all of the as yet un-deducted points in a lump sum.

Beware: if you refinance a refinance loan with the same lender, then you have to go back to deducting points gradually over the life of the new loan.

(Please note that, while we are not accountants and cannot provide tax advice, we do work cooperatively with very qualified accountants.  The information that we will share is available to the general public and should not be construed as giving income tax advice.  We are simply providing it as a value-added service to our clients, their friends and family.)  Credit to Kiplinger’s, 2017

Barbara A. Culver
CFP®, ChFC®, CLU, AEP®
Resonate, Inc.
(513) 605-2500