Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Contributing to donor-advised funds is a smart year-end move for taxpayers who receive a windfall and need to have a bigger deduction to reduce their tax bill, according to MarketWatch. Such a strategy enables taxpayers to make the deposit before the end of the year and claim a tax deduction for the current year but make the actual donation to a charitable organization next year. Those who received substantial money this year should use this strategy this year, since they won't be able to gain from the benefit next year when their earnings will revert to normal level and deductions are capped at 30% or 40% of their adjusted gross income. -- MarketWatch
Clients are advised to take advantage of tax-saving opportunities that will no longer be available after the year ends, according to Barron's. The first thing they need to do is to look for strategies to reduce their adjusted gross income, which reflects their gross income minus certain deductions. The AGI determines your clients' eligibility for certain tax credits and thresholds for deducting medical expenses and charitable contributions, not to mention how much of their Social Security is taxable. -- Barron's
Clients may use the tax rate in their tax bracket to estimate the marginal impact on their taxes, according to the Motley Fool. However, if the income puts clients between two tax brackets, the marginal tax impact of a certain amount that increases the income will not be the same as the tax rates in these brackets. Clients who experience an increase in earnings will need to determine the tax on the new income to compute the marginal tax rate. -- Motley Fool
Accelerating certain payments to get tax deductions and delaying taxable income until 2016 are some of the year-end moves clients may want to do to reduce their 2015 tax bill, according to Investor's Business Daily. Self-employed clients may consider setting up a qualified retirement plan, while others can donate appreciated stocks to lessen their tax burden this year. Other tax-saving strategies to do before the end of the year are claiming up to $14,000 in annual gift-tax exemption, harvesting tax losses and taking required minimum distributions from retirement accounts if they are retirees who turn 70 1/2 this year. -- Investor's Business Daily
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