Tax credits clients with children need to know: Tax Strategy Scan
Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Clients with children? Here are 3 tax credits they need to know
Parents are advised to take advantage of the various tax credits available to them in order to minimize the cost of child care and enhance their savings at tax time, according to this article in Motley Fool. While clients don’t need to have a child to claim the earned income tax credit, the credit's value increases according to the number of children they have, according to the article. Parents are also advised to consider the child tax and the child and dependent care credits.
Missing years? Zeroes? Here’s what clients need to know about Social Security statements
Working clients are advised to create their Social Security account on the program's website in order to get personalized estimates of their future benefits based on their actual income, obtain their latest statement and review their earnings' history, according to this article in USA Today. The estimated benefit in their statement is the amount they can expect at their full retirement age in today's dollars. The estimate is also a pretax amount, meaning the amount could change depending on when they will start collecting their benefit.
Some heirs could face a tax squeeze
The disappearance of the stretch IRA strategy for non-spouse beneficiaries should prompt clients to review their estate plans, according to this article in Kiplinger. That's because these beneficiaries will be required to draw out inherited assets within 10 years after the original owner's death, which could boost their tax bill, according to the article. “Congress pulled the rug out from under people who saved for years under tax rules they thought were certain,” says retirement expert Ed Slott.
Should your clients move to lower real estate taxes?
There are a number of considerations that clients need to make before relocating for the purpose of reducing their real estate tax burden, according to this Yahoo Finance. For starters, they are advised to determine a set of criteria that are deemed to be important to them. They should consider a location with a thriving local business scene. "If you choose a town that has a big tax base, this helps to keep the taxes lower," an expert says.
Could later RMDs lower your clients’ tax bills?
Although the RMD age for traditional retirement accounts is raised from 70 1/2 to 72 under the Secure Act, seniors need to plan to handle the "countervailing forces" that could have tax consequences, writes Morningstar's Christine Benz. "The biggie is that most retirees at this life stage are also receiving Social Security (there's no benefit for delaying beyond age 70)." she writes. "So even if they aren't working and aren't yet subject to RMDs, their control over their tax bill isn't as encompassing as it was prior to Social Security."