This isn't really a tax deduction, but it is an important subtraction that can save you a bundle. And this is the break former IRS Commissioner Fred Goldberg told Kiplinger'
s that a lot of taxpayers miss.
If, like most investors, you have mutual-fund dividends automatically invested in extra shares, remember that each reinvestment increases your "tax basis" in the fund.
That, in turn, reduces the taxable capital gain(or increases the tax-saving loss) when you redeem shares.
Forgetting to include the reinvested dividends in your basis results in double taxation of the dividends -- once when they are paid out and immediately reinvested in more shares and later when they're included in the proceeds of the sale. Don't make that costly mistake. If you’re not sure what your basis is, ask the fund for help.