Forgotten tax deductions many business owners should take: Tax Strategy Scan
Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
The most forgotten tax deductions business owners should take
Many business owners are missing out on potential tax savings by not taking advantage of certain tax deductions, according to this Entrepreneur article. For example, they fail to deduct technology expenses, purchase of electronic equipment as well as phone internet service fees on their returns. Business-related travel expenses and 50% of their dining and entertainment costs are also tax-deductible, but these tax breaks are underutilized.
How old is too old to benefit from a Roth IRA?
A Roth IRA can be a great retirement savings vehicle for older clients who want to reposition their assets in a taxable account to an environment where they won't owe taxes on the earnings, according to an article in Kiplinger. A Roth IRA has higher earnings limits, allowing high-net-worth clients to save more for retirement. Distributions are also tax-free, making the account a great tool to achieve tax diversification and leave a legacy to loved ones.
2 updates for your portfolio-review checklist
Updating the beneficiaries of investment accounts should be part of a retirement portfolio review, writes Morningstar's Christine Benz. Clients should also ensure that the cost basis of their investments is updated, especially if they bought the same shares at different intervals or reinvested the dividends or capital gains, she adds. "Those distributions, if reinvested, adjust your cost basis upward to ensure that you won't pay taxes on those distributions when you sell; you'd have already paid taxes on them in the year you received them," Benz writes.
States that collect the most income taxes
Residents in New York, Washington, D.C., and Maryland pay the most in income taxes, according to data from the Tax Foundation in this Fox Business article. Massachusetts, Connecticut and California are also among the states that impose the most income taxes.
When kids make money at a summer job, who files their taxes?
Children are required to file a tax return if their unearned income exceeds $1,100 or their earned income is more than $12,200, according to this MarketWatch article. They must also file a return if their gross income is more than the bigger amount between $1,100 and up to $11,650 in earned income plus $350. Minors who have to pay self-employment tax, the alternative minimum tax and other taxes will also need to file a return. Their parent or guardian is responsible for filing their returns if they are unable to do it for any reason.