Reinvested Dividends
While this isn’t a deduction, this move can save you quite a bit of money on your taxes, so listen up.
Most investors have mutual fund dividends automatically reinvested to buy more shares- this is a fairly typical move. Each new purchase increases your tax basis in the fund, which reduces your capital gain when you redeem shares, or it can increase the tax-saving loss.
If you forget to include your reinvested dividends in your basic leads to double taxation. It will happen once when they were paid out and reinvested and later on when they’re included in the proceeds of the sale. Ask your fund for more information if you’re unsure what your basis is.
