How the new tax law makes Roth accounts more attractive: Tax Strategy Scan
Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Why new tax rules make Roth accounts better than ever
The new tax law makes these accounts more attractive to retirement savers who want to boost their nest egg, according to this Marketwatch article. Although the account is funded with after tax dollars, the tax they owe will be lower than the tax liability on traditional IRA withdrawals in retirement, as their tax rates are likely to increase in the future. Also, investments in a Roth will grow tax-free and distributions in retirement will not be subject to income taxes.
Did your client donate to charity in 2017? Here are 4 things you need to know
Clients who intend to make charitable donations for tax purposes should ensure that they donate to a qualified charity to make the donation legitimate, according to this article on Motley Fool. They cannot claim deduction on the donation if they received a benefit in exchange for the good deed. Clients should also ensure that they claim the right deduction for donated properties and provide the proper documentation for their deduction claims.
Rev up your tax savings with these filing tips
For taxpayers to make the most of all the breaks available to them , experts suggest enhancing their savings this tax season, according to CNBC. Some of these tax breaks are above-the-line deductions, meaning clients need not itemize deductions to get the tax breaks. These deductions are for contributions to their health savings accounts and IRAs. Clients can deduct the full amount of their IRA contributions, provided they meet the income requirements based on their filing status.
Tax rules to know for gig economy workers
Gig workers may face complex tax rules that regular employees and owe a bigger tax bill than expected, according to this Chicago Tribune article. For example, independent contractors may need to make quarterly estimated tax payments as well as self-employment taxes. “While folks may realize they’re going to owe federal income taxes on their income, they don’t necessarily plan on self-employment taxes and miss making quarterly-estimated payments,” an expert says.
5 states with no state sales tax
Alaska, Delaware, Montana, New Hampshire and Oregon are the states that impose no state sales tax, according to this article on Kiplinger. Clients who intend to relocate in retirement should make just consider sales tax, as some states that have a sales tax can be more-tax friendly than those that impose such a tax. For example, despite a high sales tax in Tennessee, the state is a much preferred retirement destination because it does not have an income tax.