Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
See the IRS's incredibly generous tax benefits for hiring your own child: Aside from the Child Tax Credit, clients can also take advantage of another child-related tax benefit if they hire their own children in their business, according to Forbes. By hiring their children and paying them a salary, parents can reduce their business' taxable income since the children's wages are tax-deductible. The wage should not exceed $6,300 annually so the children will be exempt from paying taxes and filing a tax return. -- Forbes
Understanding education tax credits: Clients who are looking for ways to save on taxes on their 2015 tax returns can claim the American Opportunity Tax Credit or the Lifetime Learning Credit if they incur education-related expenses this year, according to The Cincinnati Enquirer. They qualify to get one or both of these tax breaks if the expenses were for the taxpayers themselves, their spouse or a child. Education expenses qualified for the AOTC include tuition, fees and other related costs, while only tuition and other enrollment fees are eligible for the LLC. -- The Cincinnati Enquirer
3 tax-efficient retirement-saver portfolios: Maintaining a tax-efficient retirement portfolio should be a goal not only of clients but also those who are in the accumulation stage, according to Morningstar. They need to minimize their trading in their portfolio for lower taxable capital gains distributions and also look for stock funds with patient, low-turnover strategies, Benz writes. "Exchange-traded funds, index funds, and tax-managed funds all tend to have very low turnover and, in turn, do a good job reducing the tax collector's cut of their portfolios' returns." -- Morningstar
How variable annuities are taxed: Variable annuities are subject to tax rules that also apply to fixed annuities, but the earnings from investment choices are tax-deferred, according to Investopedia. Taxes on the earnings are paid when annuity holders start collecting payments or opt to take distributions before the annuity's starting date. Payments or distributions received before the starting date will consist of a tax-free portion and earnings which are to be taxed as an ordinary income. -- Investopedia
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