How to deduct medical expenses for clients over 65
Taxpayers who are 65 and older would be better off with an itemized deduction instead of a standard deduction if they paid Medicare insurance premiums and incurred hefty health care expenses last year, according to this article on MarketWatch. This strategy would allow them to make the most of these medical costs and save more on taxes. To determine if itemizing results in greater tax savings, seniors are advised to get the total amount of their deductible health care expenses, subtract the percent of adjusted gross income deduction threshold, add up their other itemized deductions and compare the total amount to the standard deduction.
Clients have 2 choices: reduce spending or scale back retirement lifestyle
An Ipsos/USA Today survey found that a majority of Americans in the 45-65 age bracket believe that they will have to reduce spending in retirement, according to this article on USA Today. The survey also found that 27% of the respondents have neither retirement savings nor investments, and 22% said they have saved less than $100,000. “I find that to be a [relief] that people are aware they won’t have as much. We have fewer ostriches with their heads in the sand,” says a certified financial planner.
Hidden 401(k) fees can destroy your retirement dreams
401(k) plans may charge hidden fees that could hurt workers' retirement prospects, writes an expert on CNBC. Indeed, a 401(k) participant can get 10 more years in retirement income if there is a just a 1 percentage point reduction in plan fees, the expert explains. Employers should do their due diligence in providing their employees low-cost investment options "where fees are reasonable, brokers are eliminated, no commissions are paid, and the plan provider doesn't share in the fees charged by the mutual funds in the plan."
The side-gig, tax-time retirement play
Self-employed taxpayers who earned an income from a side gig or their own business last year can still contribute to a SEP IRA and claim a tax break for the contributions, according to this article on Forbes. For example, 50-year-old workers who received $100,000 in self-employment income can contribute as much as $20,000 to the account for 2016. “Many clients are unaware of the SEP, but they want to do it when I tell them about it,” says a financial planner.
Save for retirement and get a tax break too
The tax filing season can be the right time to set aside some money for retirement, according to this article on Bankrate. Although taxpayers can no longer make tax deductible contributions to their workplace retirement plan for 2016, they still have time until April 17 to sock away as much as $5,500 (or $6,500 for those aged 50 and older) in a traditional IRA. This entitles them to a saver's credit that can raise their tax refund while taking advantage of tax deferral on the contributions. “Many eligible savers may actually be confusing the two incentives,” says an expert.