Ways to Save Clients Money on Taxes Before Year's End
Financial advisors can help clients reduce their tax liability in the year ahead with a few simple strategies to carry out before the end of 2016, Marilyn Timbers writes on Business Insider.
The first step is to max out contributions to 401(k) plans to lower taxable income and boost savings, according to Timbers, a financial adviser at Voya Financial Advisors. The limit in 2016 for individuals under 50 is $18,000 and goes up to $24,000 for savers 50 and over. If that’s too much, clients can contribute the maximum that their employer would match, Timbers writes. For those without employer-sponsored plans, there’s a silver lining: they can derive similar benefits by funding an individual retirement account.
While the maximum IRA contribution in 2016 is only $5,500, or $6,500 for those 50 and over, the deadline to fund an IRA isn’t until April 17 next year, she writes. But it’s best to act sooner rather than later so as to maximize potential growth in the account.
The next step is to consider the $6,300 standard deduction allowed in 2016 for single tax filers, or $12,600 for married couples, according to Timbers. If the client anticipates exceeding those limits, they could save on their tax bill by paying deductible expenses now rather than next year. Savers whose mortgages are tax-deductible, for example, could make a January payment now, she writes. Clients can also reduce their tax burden by donating to an IRS-qualified charity, according to Timbers.