A Simple Tax Checklist for Organizing Your Investments

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It’s that time of year — if you collect any kind of income at all, you need to be ready to file your income tax return. This puts a special burden on investors, which is why we’ve provided a simple checklist for organizing your investments for income tax preparation.

As you begin gathering the documents and statements to take to your CPA (or to DIY) make sure you don't forget these most common investment sources and specific documents you’ll need to ensure your taxes are filed properly.

Interest and Dividend Income

If you receive interest or dividend income from any source, you should have either a Form 1099-INT for interest income or a 1099-DIV reporting dividend income.

You can get such forms from any source from which you earn fixed income, so if you don’t have one from a payer you need to contact them to obtain one. Simply using bank statements or dividend payment receipts won’t always provide the information needed for income tax purposes, which is why 1099s are specifically for this purpose.

Investment Partnerships

Investment partnerships provide shares of ownership in an organization — typically a partnership — that exists for a specific type of investment. The most common forms are for oil and gas (or other energy) activities or investment real estate.

The company will issue you a Form K-1, which will provide investment results as they relate to your specific share of the partnership.

The K-1 will often include supplemental information that will be needed for proper tax preparation. Even if this information doesn’t look as “official” as the K-1 itself, it may contain information clarifying numbers provided in the K-1.

Investment Real Estate

Reporting the results of investment real estate for income tax purposes isn’t as clean and easy as it is for other investment types. Investment real estate is more of a business, which means you will have to organize and provide the necessary income and expense information.

If you maintain separate records for your rental property, you probably keep some sort of general ledger recording your income and expenses. This is even easier if you maintain a dedicated bank account into which you deposit all rent checks and issue payments for any expenses related to the property.

Documents and expenses you will need include:

  • Records of rental income received
  • Form 1098 reporting mortgage interest paid — this will often also report property taxes paid, but not always
  • Homeowners' association dues
  • Capital expenditures (major improvements to the property)
  • Insurance premiums paid
  • Repair costs
  • Maintenance costs, including lawn care, snow removal, painting, building security and pest control
  • Marketing costs to obtain suitable tenants — this includes commission fees paid to real estate brokers or apartment finders
  • Management fees paid to a property manager
  • Office expenses related to the management of the property
  • Travel and lodging expenses related to you visiting the property, if it is in a remote location

Capital Gains and Losses

Investment brokerage firms report capital gains and losses on a Form 1099-B. In most cases, this form is a summary version of your investment activity for the preceding year. It will include the total value of securities sold, interest and dividends from assets in the account, investment interest, and other important details for the preparation of your income tax return.

But you should not rely entirely on your Form 1099-B. Your broker generally has a more detailed annual investment report with far more information. This will include a breakdown of long- and short-term capital gains, as well as the cost basis for many, most or all of your trades.

Cost basis, however, often requires additional effort on your part. Though brokers are required to report the cost basis of investments sold, they don’t always have this information.

If you have moved your account from one broker to another, the current broker won’t have information on securities purchased through your previous broker. This may also occur if you purchased or inherited investments many years ago and never supplied the cost basis to your broker.

In any of these cases, you will be responsible for producing the cost basis of any investments sold but not reported by your broker. It may require one or more of the following steps:

  • Requesting cost basis from previous brokers
  • Providing cost basis from your own records
  • Obtaining the information from the executor or trustee for any inherited stock

Review your Form 1099-B or annual investment summary from your broker and be sure there is a cost basis for any investment assets sold. If any are missing, you’ll have some work to do.

Investment Expenses

As an investor, the IRS will allow you to deduct certain investment expenses, even if they are not fees paid to or through an investment broker or manager. Investment interest is one example.

You can deduct investment interest incurred, up to the amount of investment income you have received during the year. This information will generally be included on Form 1099-B, as discussed above.

Other expenses include:

  • Investment related education expenses, such as attending conferences and courses
  • Investment publications, including books and periodicals used in the course of your investing activities
  • Investment management fees, which once again are typically reported by your investment manager on Form 1099-B

You can deduct these expenses as miscellaneous expenses, subject to the “2% floor.” This means only the portion of investment expenses exceeding 2% of your adjusted gross income can be deducted as a miscellaneous itemized deduction on your 1040 Schedule A.

Income Tax Rates for 2018

As a bonus, here are the income tax rates for 2018. It’s important to remember these are rates applying only to this year, as reflected on next year’s tax return. For the tax return you’ll be preparing this year, refer to rates for 2017.

Single Taxable Income Married Filing Joint Taxable Income Tax Rate
Up to $9,525 Up to $19,050 10%
$9,526 up to $38,700 $19,051 up to $77,400 12%
$38,701 up to $82,500 $77,401 up to $165,000 22%
$82,501 up to $157,500 $165,001 up to $315,000 24%
$157,501 up to $200,000 $315,001 up to $400,000 32%
$200,001 up to $500,000 $400,001 up to $600,000 35%
$500,001 or higher $600,001 or higher 37%



Kevin Mercadante

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids.

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One Comment

  1. A licensed tax consultant means that the person is a tax consultant and is licensed to perform as such. The only tax-specific license I am aware of is the EA (Enrolled Agent). To become an enrolled agent, you have to sit for, and pass a multi-part, 2-day exam administered by the IRS. As far as the IRS and the various state tax authorities are concerned, the only individuals who can represent taxpayers (their clients) before the tax authorities are CPA’s, EA’s, and licensed attorneys.

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