The Key to Reducing Taxes

Comments on “Increasing the Aftertax Returns on Your Portfolio,” by Charles Rotblut, in the December 2024 AAII Journal:

I find the AAII annual tax update a great starting point for tax-related changes each year. I haven’t submitted a paper return since my first use of TurboTax for tax-year 1997, but I supplement the software and my tax code understanding by spending several hours each year reading Internal Revenue Service (IRS) publications. Doing my own taxes keeps the details of tax code implications on my investing decisions at the top of my mind year-round, and that’s a money-saving benefit. I don’t have an accountant look over my work, and yes, I’ve made some boneheaded mistakes, but nothing that was that costly. Besides, the lessons learned just make a deeper impact when there is some cost involved.
—Thomas S. from Oregon

Young investors: Do your own tax returns! You necessarily learn about the tax code and can apply it to your long-term benefit. Most tax preparers don’t have the time to coach you on all the tax-saving strategies available. In the long run, ignorance of the tax code will cost you. I prepare my returns manually, but then I use TurboTax to double-check my work and e-file.
—Robert A. from North Carolina

I estimate my tax liabilities as I go. I have done this for many years. I diligently try to learn and follow the rules as they change year to year, but I always have a certified public accountant (CPA) file our returns. The costs in penalties and aggravation for me screwing up a simple calculation or omitting a liability is just too great not to have a CPA check my homework.
—Barry J. from Texas

Preparing for Tax Season

Comment on “Year-End 2024 Tax Planning: Maximizing Your Savings,” by Charles Rotblut, in the December 2024 AAII Journal:

These are good suggestions but one is missing: Why not use last year’s tax software throughout the next year—say, quarterly—to estimate one’s taxes? We have a somewhat stable tax regime—well, at least until 2026.
—Victor S. from North Carolina

Tax Rules for Bitcoin

Comment on “Guide to Tax on Your Personal Investments 2024,” by AAII Staff, in the December 2024 AAII Journal:

How about a section on the taxation of bitcoin and other digital assets? I understand that wash-sale rules do not apply to bitcoin. It is getting enough attention that it should be considered for inclusion.
—Charles S. from Virginia

AAII editors respond:
Charles, we address cryptocurrencies throughout the tax guide. You are correct that bitcoin is currently exempt from the wash-sale rule. Here is what we say in the wash-sale rule section: “Also, [the wash-sale] rules do not apply to cryptocurrencies, commodity futures and foreign currencies, but they do apply to stock options (puts and calls).”

Thoughts on the TCJA and Standard Deduction

Comments on “Comparing the Standard Deduction With and Without the TCJA,” by Charles Rotblut, in the Illustrating Trends Dispatch in the December 2024 AAII Journal:

Taking a standard deduction has an alternative: You can take an itemized deduction. But that requires increased record-keeping, organized documentation, more math, additional tax preparation work and understanding the tax laws in greater detail, and it may increase filing fees due to the extra work at every stage of the process. The Tax Cuts and Jobs Act (TCJA) of 2017 should be viewed as a taxpayer-friendly improvement that simplifies a complicated tax system to enable taxpayer compliance and simplified IRS surveillance. Many see the TCJA as one of the first efforts (in 2017) to make government regulation less burdensome. Many people are expecting more changes like the TCJA near term as compliance with government regulations gets simplified and reduces unnecessary expenses for both taxpayers and tax collectors.
—Barry J. from Texas

Simple is good, but the TCJA added considerably to our national debt (between $1 trillion and $2 trillion). And while I am personally gaining by the current low tax environment, I can’t feel good about the debt legacy we are leaving behind.
—Randall L. from California

Two quick points. 1) The majority of all American households file as single or head of household, so Figure 1 is not representative of the majority of tax filings. 2) One of the casualties of the TCJA was the death of the individual exemption, which should be included with the prior version of the standard exemption since that was also in the basic math of all returns that filed using the standard exemption prior to the TCJA.
—Sterling C. from New York