As interest rates increase, so does the allure of optimizing your U.S. income tax deductions. But be careful, the devil is in the details. One area where taxpayers can potentially save money is by deducting investment expenses. The Tax Cuts and Jobs Act may have cut tax deductions for financial advisor fees, but you can still find handy tax breaks if you know where to look.
If your expenses are less than your net investment income, the entire investment interest expense is deductible. If the interest expenses are more than the net income, the excess can be carried forward to future years. Businesses of all sizes make capital investments in tools, buildings, and research that allow workers to produce new goods and services, and these expenses can also be deducted from taxes.
Day trading stocks offers huge potential rewards and huge potential losses. It also offers some really sweet tax breaks — if you qualify. Only a dreamer would deny that there is a real threat of government regulation targeting captives. For the realists, however, this threat to captives' deductibility can be managed with careful planning and documentation.