Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Buying life insurance coverage is a tax-efficient strategy in estate planning, according to Bloomberg. Clients get life insurance policies to give their beneficiaries money to cover hefty estate taxes, not to replace lost income. Proceeds from the policy for the beneficiaries are not taxable as income or included in the decedent’s estate if the policyholder had not taken any ownership control over the policy. -- Bloomberg
401(k) participants are allowed to make a dollar-for-dollar contribution if they prefer after-tax contributions to profit-sharing contribution, according to Forbes. The yearly dollar-for-dollar contribution could reach $53,000, compared with a $38,000 maximum annual contribution if they opt for profit-sharing. Using the after-tax contribution strategy, clients could defer $15,000 more, with the contributions not subject to salary deferral limits that apply to other contributions. -- Forbes
After the Supreme Court upheld the constitutionality of same-sex marriage, gay couples will save on costs for preparing their tax returns because they will be allowed to file jointly on both the federal and state levels, according to Kiplinger. However, they may face the marriage penalty that could boost their tax bill, and won't be eligible to contribute to a Roth IRA or claim tax deductions on traditional IRA contributions because of their combined income. Same-sex couples who intend to marry by year's end can avoid paying tax penalties by adjusting their withholding. -- Kiplinger