Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
A household with two children and $125,000 in annual income can expect their tax bill to decline to $10,099 in 2018 from $14,253 the prior year, according to this article on Motley Fool. While income that is taxable is likely to increase for this family, their final tax bill will be lower thanks to lower tax rates. "In addition, the increase in the child tax credit contributes a full $4,000 to their refunds, compared to the much-smaller former credit — which was subject to a $750 reduction due to income phase-outs," according to the article.
Clients will be better off using tax-efficient strategies to leave a legacy to their heirs, writes an expert on Observer-Reporter. “If you want to leave a bigger tax-free legacy, you may want to buy life insurance with the money,” the expert writes. “The death benefit from life insurance is income tax-free to the beneficiary. The CFP adds, “there are many different uses for life insurance, so it is important to purchase the correct product."
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Clients are willing to pay more for tax advice, but they’re still not getting it.
October 24 -
Recent tax laws added complexitynot to mention sticker shockto clients tax obligations. But with smart planning, you can alleviate some of the pain.
November 3 -
You’ll probably find administrators blocking the backdoor Roth IRA strategy more than anyone else, says Kimberly Foss, planner, author and Financial Planning contributor. That’s when you’ll have to adopt the role of educator, she says.
October 18
Do you have clients relocating in retirement? Taxes are one of the factors that seniors should consider when choosing a state move to in retirement, according to this article on Kiplinger. "Moving from a pricey part of the country to one with low housing prices could also lower your expenses and make your retirement savings last longer," the article states. "But as you consider the cost of living in potential retirement destinations, don’t overlook the impact of state taxes on your bottom line."
Retirees can avoid or minimize the tax bite on their Social Security benefits by keeping their taxable income below the IRS thresholds, according to this article on U.S. News & World Report. They should also manage their other income sources, set up Social Security tax withholding and consider state taxes on their income and benefits. Contributing to a Roth IRA can help reduce taxable income in retirement. Drawing funds from traditional IRAs before filing for Social Security benefits is recommended, as the move could help lower mandatory distributions from tax-deferred accounts as well as the taxable income, which is the basis for taxing Social Security benefits.
What some clients tried to claim on their tax returns shows they often don't know much about accounting.
There are many deductions clients can still claim this year, this article on Cleveland.com notes. These breaks include deductions for charitable donations, mortgage interest, home equity loan interest and property taxes. "The Tax Cuts and Jobs Act limited itemized deductions and doubled the standard deduction to entice more taxpayers to skip itemizing — but money-saving deductions still remain for eligible taxpayers in 2019."
