Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
While all lawmakers can agree that the tax system is too complicated, revising the rules by simplifying the code could be just as difficult, according to CNBC. Congress will have a difficult time scrapping the loopholes in the tax code, which benefit households more than corporations. Tax expenditures for individual taxpayers are estimated at $15.6 trillion over the next 10 years, while business loopholes would also mean $2.7 trillion over the same period, according to data from the Tax Foundation.
Clients are entitled to a mortgage interest deduction on a second home they acquire, provided they don't rent out the property for more than 14 days, according to this article on Kiplinger. The deduction is limited at the interest paid for no more than $1 million in home mortgage on their first and second homes. Homeowners should opt for itemized deduction, so they can claim the mortgage interest payments as well as property taxes on the two properties.
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Clients who have assets in an IRA but want to reduce the costs may want to roll the money into their 401(k) plan if their employer allows such transfer.
March 6 -
Why advisers should use age-banding to plan for retirees’ spending levels to flex and adjust.
December 30 -
These programs can help advisers cut through the confusion to help clients.
December 21
Middle-income workers stand to lose from proposed tax changes requiring 401(k) participants to convert their traditional assets into a Roth in order to accelerate tax revenue, according to CBS Moneywatch. This could also mean higher taxes for these middle-income workers. Another consideration is that both traditional 401(k) and Roth 401(k) accounts are subject to required minimum distribution rules, which means workers will have to take mandatory withdrawals even if they have no need for the money.
Seniors who live beyond the maturity date of their permanent life insurance policy will collect benefits equal to the policy's face value, according to this article from the Connecticut Post. These benefits will be lower than the death benefit that their beneficiaries would collect. The benefits are also treated as taxable income.
Fifteen tax planning tips from analysts and industry experts advisers may consider in 2017.
Taxation of withdrawals from a variable annuity depends on where the product is held; but generally, the tax is deferred until the funds are withdrawn, according to article from the Chicago Tribune. For example, the entire amount of the withdrawal is subject to income tax if the financial product is bought within a 401(k) or traditional IRA. Only the earnings portion of the withdrawal is taxed as income if after-tax money was used to buy the annuity.
