Tax Tips Blog

Ben asks:My question is regarding my subscription to investment newsletters and paid subscriptions to investment websites. Can I deduct that when i do taxes, if so what documentation will i need. I also have a sharebuilder account and pay a monthly fee for that. What about any losses i have incurred? Also, how would i go about getting the standard 30 for the spanish american war? Ben

My reply:Hello Ben! The costs of your investment subscriptions are deductible as miscellaneous itemized expenses on Schedule A, provided that you itemize deductions and that the total of your miscellaneous itemized deductions exceeds 2% of your Adjusted Gross Income (AGI). You should retain your receipts to prove this deduction, if necessary.

The monthly fee in your sharebuilder account is either another miscellaneous itemized deduction or a commission charged for the purchase of shares. If the fee is linked to the specific transactions it is a commission and adds to the cost basis of the shares purchased. If it is a flat fee that is charged whether or not you have any transactions or regardless of the number of transactions, it is a deductible investment expense.

Capital gains and losses don’t affect your taxes until you sell the investment. At that point you report the sale on Schedule D and calculate your gain or loss.

The $30 refund of the Spanish American War tax, also referred to as the Telephone Tax Refund, has a special line in the “payments” section of Form 1040 or its variants.

If you send the IRS either a paper tax return or an electronically filed tax return before Feb. 3, 2007 and you are claiming a benefit from one of the “key tax provisions” (such as a deduction for local sales tax and educator expenses) which were enacted last December, your return will be accepted, but not processed. This of course, will delay the processing of any refund you may be entitled to receive. The IRS stated that they will begin processing those returns after Feb. 3, 2007 because that is when their computers are expected to be updated to include the provisions of the Tax Relief and Healthcare Act of 2006. The IRS once again informed taxpayers of the benefits of e-filing: “E-file is fastest, safest and most accurate way to file a tax return,” said IRS Commissioner Mark W. Everson. “People will get their refunds faster through e-file. E-file greatly reduces the chances for making an error compared to filing a paper 1040.”

SD would like to know:I overpayed my both state and federal by about $12,000. Since the money I used to make the payments was already subject to taxation, can I assume the state and federal refunds will not be taxable on my return, or is my logic flawed ? Thank you kindly. SD My reply:Thanks for visiting SD! This may sound like a simple questions, but since it’s tax related it isn’t as simple as it may seem. Federal tax refunds are not taxable income on your Federal tax return, as they are merely return of an overpayment of taxes. However, federal tax refunds can be taxable income on your state return, if your state allows deductions for federal income tax paid, and you used the deduction. Since you didn’t tell me what state you’re in, I don’t know. State tax refunds are usually taxable on your federal return if you itemized your deductions. However, if you deducted your state taxes on your federal return, but were subject to AMT and did not receive a benefit for the state taxes, then they will not be taxable income on your federal return. If you did not itemize your deductions, the state tax is not federally taxable. I hope this clears things up for you, Gina