Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
State 529 savings plans are reducing their fees to lure more parents to save for college education costs, according to this article on The New York Times. Clients have the option of investing in 529 plans in other states, but depending on where they live, they could get an extra tax break if they contribute to their own state's plan, according to analysis. The state tax break is available in 34 states and the District of Columbia.
Seniors preparing to retire next year are advised to determine their expenses, including healthcare costs, according to this article on CNBC. They should also develop a Social Security-claiming strategy that will maximize their benefits and review the risks in their retirement accounts. Moreover, pre-retirees need to evaluate their income and tax strategies, as they may have different income sources with different tax treatments. "Many people have a few different types of assets, so they want to be smart about which they tap into," an expert says.
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While there’s no fail-safe method for modeling the costs, a popular calculation may significantly under- or overstate the burden of tuition, room and board, Kitces.com research associate Derek Tharp writes.
December 6 -
FINRA Rule 3210 typically requires permission for brokerage accounts.
May 29 -
Making excess withdrawals could result in taxes on the earnings and a hefty 10% penalty.
August 18
Fall is an opportune time for clients to review their portfolio and make last-minute moves to enhance their tax savings, an expert on Delaware Business Times writes. "This year, you need to keep in mind the impact of the Tax Cuts and Jobs Act," according to the expert. "Although the TCJA didn’t change long-term capital gains rate, it did change the tax brackets for long-term capital gains and qualified dividends."
Clients who borrow money from a 401(k) are making a poor financial decision, according to this article on Bankrate. That's because a 401(k) loan may prevent them from making contributions and taking advantage of the plan's tax benefits. A 401(k) loan can also trigger fees and result in reduced paychecks, as they have to repay the loan with post-tax dollars. Borrowers who defaulted on their 401(k) loans will face an income tax bill on the borrowed amount plus a 10% tax penalty.
What some clients tried to claim on their tax returns shows they often don't know much about accounting.
Clients can expect a nearly 10% increase in IRA contribution limits next year, allowing them to save more for retirement, according to this article on Motley Fool. Those who contribute to a traditional IRA are building their nest egg on a tax-deferred basis, while those who sock away funds into a Roth account will get tax-free income in retirement. Some taxpayers may also get a tax deduction if their adjusted gross income is below a certain threshold.
