Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Investors should maximize their contributions to 401(k)s and IRAs to enjoy tax-advantaged benefits, according to The Motley Fool. Investors should at least contribute up to the full employer match of their 401(k) and then strive to reach the maximum deferral. Even when you have a 401(k), you can still create an IRA. Clients with children should also open a 529 to get tax-free growth and withdrawals as they fund their children through college. -- The Motley Fool
Clients should review their completed tax returns and compare them with their previous ones to discover how they can further improve their financial picture, according to Morningstar. For instance, if their 2014 retirement-plan contributions did not reach the maximum amounts for that year, they could attempt to achieve a higher contribution rate this year. Among other items that need to be assessed are interest income, dividend income, IRA distributions and capital gains or losses. -- Morningstar
Taxpayers can lower their federal tax liability by deducting several non-federal taxes they have paid from their federal income, according to Yahoo Finance. Among the allowable deductions this tax-filing season are state and local income taxes, or in certain cases, sales taxes, real estate taxes, personal property taxes, and intangible taxes on investments. There are taxes, however, that can't be deducted from one's federal income, such as federal excise taxes, Social Security and Medicare taxes, and federal unemployment taxes. -- Yahoo Finance
Clients' tax concerns often reflect the complexity of the U.S. tax system, according to The Wall Street Journal. For instance, although clients can qualify for a full capital gains tax exemption if they sell properties that are primary residences for at least two years within the five years before the sale, exceptions are still possible. In other cases, several taxpayers who aren't high-earners fall into the trap of being subjected to Alternative Minimum Tax, while poor Americans often fail to recognize their eligibility to benefit from the Earned Income Tax Credit due to its complexity. -- The Wall Street Journal
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access