8 year-end tips for clients to get a bigger refund: Tax Strategy Scan
Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Eight year-end tips for clients to get a bigger refund
To increase the odds of receiving a bigger tax refund, taxpayers should consider a tax planning professional to prepare their return and get organized with their tax documents, an expert writes at the Huffington Post. They should consider strategies that reduce their taxable income, like contributing to their tax-deferred retirement accounts, the expert writes. They should also take advantage of the tax breaks available to them, such as tax deductions for charitable donations, education expenses, mortgage interest payments and small business costs.
Tax reform could hit certain states harder than others
Taxpayers in California, New York and other states with higher tax rates can expect a bigger tax bill if the GOP plan is passed into law, according to this article on CNBC. The proposal includes provisions that would eliminate state and local tax and mortgage interest payment deductions, which are valuable to residents of these states. "The bottom line is for families in these particular states ... the loss of deductions will impact them much more than families in states with lower state income taxes and real property taxes," an expert says.
Saving too much for retirement could force clients to take loans or make withdrawals that would carry taxes and penalties.September 26
The IRS is relaxing some rules to make pulling money from retirement plans easier after hurricanes Irma and Harvey, but clients should remember the taxes and penalties associated with withdrawals are unchanged,September 14
Even with growth, the Senate tax bill still adds $1 trillion to deficits
Analysis by the Joint Committee on Taxation shows that the federal government could see almost $408 billion in net new revenue from the economic growth that would be spurred by the Senate tax bill in 10 years, according to this article from CNNMoney. However, the government would incur about $1 trillion more in deficits under the Senate bill. A spokesperson for the Senate Finance Committee calls the analysis incomplete, as it doesn't account for the "final outcome of the evolving Senate tax bill — which will be amended on the floor this week."
Tax tips to keep in mind as potential for reform looms
As the GOP tax bill awaits approval by Congress, taxpayers should consider deferring income and accelerate deductible payments before the end of the year, according to this article from the Cincinnati Enquirer. Clients may also consider maxing out their retirement contributions and selling their depreciated shares so they can use the losses to write off taxable capital gains. They should also consider paying college costs by year's end, as the American Opportunity Tax Credit is still available this year.
Consider these year-end tax-smart financial moves
Taxpayers who want to save on their 2017 returns should consider increasing contributions to their tax-deferred retirement accounts like 401(k)s and traditional IRAs before the year ends, according to this article from the Middlesboro Daily News. Clients may also want to donate to charity and get a federal tax break in the process, or contribute to a 529 college savings account, as they may get a state tax break for the contributions. Investors sitting on losing shares may want to do tax-loss harvesting to turn losses into gains.