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The Beltway crowd is scrambling to plug a $1.5 trillion budget gap that could result from proposed cuts to corporate and personal taxes.

Proposals, of course, change on a seemingly daily basis but some trial balloons have included reducing deductions for 401(k) contributions, property taxes, and mortgage payments.

The proposed changes have caused many Americans to question the impact of tax reform on their individual savings programs, which is creating an opportunity for advisors to add value to their client relationships by providing education.

As such, advisors should be prepared to provide financial models that illustrate the impact of potential tax reform. Advisors can also use potential tax reform as an opportunity to build relationships with tax specialists to assist in tax planning.

The consequences upon the federal budget of proposed tax cuts are being hotly debated. Proponents of the changes claim that the tax cuts will stimulate economic growth that, in turn, will result in more tax revenues. Under the so called dynamic scoring model, therefore, the impact on the federal deficit of cuts could be minimal.

Other Washington insiders may acknowledge that tax cuts will stimulate the economy, but claim that tax revenues from additional growth won’t be sufficient to avoid increasing the nation’s deficit.

Regardless of the debate on dynamic scoring, republicans are searching for $1.5 trillion in either spending cuts or new sources of tax revenues, reports the Los Angeles Times.

Even though the pretax nature of 401(k) contributions costs the U.S. Treasury approximately only $115 billion annually, some Congressmen are assessing if they should curtail the provision to generate revenue. Under one proposal, the current $18,000 annual limit on pre-tax contributions for individuals age 50 or younger would be slashed to $2,400.

Individuals would still be allowed to make contributions on an after tax basis under the Roth program. Investment gains on those contributions wouldn’t be taxed.

For individuals who already make substantial pretax contributions, the potential change could create uncertainty. With that in mind, financial advisors should be prepared to run retirement savings models based on different tax scenarios. For example, fully funding a 401(k) may currently be appealing if individuals invest the tax savings they receive from making pretax contributions and if they expect their income tax rates to decline upon retiring.

Most individuals don’t invest their tax savings, however, so savings models may show that individuals may be better off with funding their retirement programs on an after-tax basis.

Proposals to curtail tax deductions for property taxes and for mortgage interest payments are also opportunities for advisors to provide clients with value-added assistance. Many potential home buyers often compare the cost of homeownership to the cost of renting. In making such comparisons, understanding the costs savings of deductions for mortgages and property taxes is crucial.

Advisors should therefore be able to run different comparisons based on a variety of potential changes to the mortgage and property tax dedications. As part of helping clients assess the merits of purchasing homes, advisors should emphasize that potential tax savings are just one consideration.

For younger individuals, the long-term benefits of homeownership may be appealing even if the loss of mortgage and property tax deductions makes ownership compared to renting look less appealing in the near term. For example, over time, individuals will build principal in their homes, which can make ownership more appealing than renting. Potential gains in home values may also make home ownership appealing.

Advisors may also want to work with tax specialists to develop end-of-year strategies for clients. For example, clients that may plan to start collecting Social Security in 2018 may want to sell appreciated securities this year, reports CNBC.

By doing so, the earnings from the sale of securities won’t make their Social Security income taxable. In a similar manner, clients may want to donate securities to charities to avoid paying taxes on investment gains and to qualify for deductions that would be based on the full value of the contributions.

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