Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Despite an occasional congressional nod to simplifying tax-sheltered savings, investors still have to find their way through a dizzying maze of tax-advantaged investment wrappers, according to this article from Morningstar. There are multiple types of IRAs, company-retirement plans and college-savings accounts, as a few examples, all with advantages and disadvantages. Each has its own tax treatment, its own rules over who can contribute and how much and its own policies on distributions. For instance, traditional 401(k), 403(b) and 457 plans are funded with pretax dollars, and withdrawals from these accounts will be subject to income tax. Roth 401(k), 403(b) and 457 plans accept after-tax contributions and offer tax-free qualified withdrawals. Pay close attention to the wrappers clients choose for their investment accounts and maximize their investments in tax-sheltered vehicles to enhance take-home returns. The longer the investment horizon, the greater the tax savings are apt to be. Learn more here about tax-sheltered investment accounts, as well as the tax implications of contributing to these accounts. -- Morningstar
With home values rising and rents on the upswing, advisers should educate clients on the different tax advantages that come with each, according to MarketWatch. For example, rentals aren't technically tax deductible, but using part of a rented home for business purposes can enhance returns. By comparison, the IRS allows deductions for3 certain home ownership expenses. -- MarketWatch
More than 10,000 people have signed up for the myRA, America's newest retirement account which provides convenience and safety because there's only one investment option and no risk of losing money, according to U.S. News & World Report. Here's how clients can set up their accounts and maximize benefits. Although myRA contributions are not tax deductible, as the account is funded with after-tax dollars, retirement savers will pay no taxes on the investment gains. -- U.S. News & World Report
The mid-year offers opportunities to reduce a client's tax bill for 2016, according to Kiplinger. For example, clients who filed for an extension shouldn't wait for the deadline to do their taxes and should adjust their withholdings for the current year if they expect to receive a bigger refund. They also may want to max out tax-deductible contributions to their retirement plans and consider giving cash gifts or appreciated securities to family members to qualify for tax breaks. -- Kiplinger
