According to a study issued today by BMO Harris Financial Advisors (BHFA), 46% percent of those Wisconsinites surveyed prepare their own tax returns. Further, 79% percent — below the national average of 83% are confident that their completed tax returns will take advantage of all of the tax deductions, tax credits or other tax savings that may be available to them.
However, despite this sense of confidence, two-thirds (61 percent) of respondents in Wisconsin admitted they are not knowledgeable about tax smart investment solutions designed to reduce their overall tax liability, including protecting their investments from a tax perspective and transitioning them in a tax-efficient manner to the next generation. Further, the study found:
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Just over a quarter (28 percent) understand how capital gains are taxed (below the national average of 44 percent).
Only one-third understand how dividend income is treated from a tax perspective (far below the national average of 47 percent).
"It’s encouraging that so many Wisconsinites feel confident as they prepare their tax returns before the mid-April filing deadline," said Mike Miroballi, President, BMO Harris Financial Advisors. "But it’s important to understand the full picture on how you are being taxed — especially with investments. Knowing how you are being taxed before making an investment decision can have a significant impact on net returns."
Mr. Miroballi noted that a financial professional can play a critical role in making an investment portfolio more tax efficient. For example, BMO Harris Financial Advisors works with clients to determine investment solutions which best fit their specific needs and goals. This may include reducing one’s tax liability and transitioning assets to the next generation in a tax-efficient manner.
Wisconsinites and their tax refund plans
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By GlobalDataThe study also examined what those who expect a tax refund plan to do with the money:
- Thirty-five percent will save or invest (compared to 42 percent nationally).
- Twenty-nine percent (below the national average of 35 percent) will cover household bills and/or reduce their debt load (credit card balances and debt other than mortgage).
- Sixteen percent will fund vacations or purchase leisure items.
- Seventeen percent will spend on home renovations.
- Six percent will donate to charitable causes.
"It’s encouraging to see that so many in our state who are expecting a tax refund will be looking to the future and saving or investing the money or will use it to reduce their overall debt," said Mr. Miroballi.
Key National Findings
Forty-eight percent of those Americans surveyed are preparing their own tax returns.
The vast majority (83 percent) are confident that their completed tax return will take advantage of all tax breaks.
Just under half (45 percent) of the respondents admitted they are not knowledgeable about tax-smart investment solutions designed to reduce their overall tax liability.
Just 44 percent understand how capital gains are taxed and only 47 percent are familiar with how dividend income is treated from a tax perspective.
Forty-two percent of those Americans surveyed who anticipate getting a tax refund plan to use the money to pay household bills/reduce their debt load; 35 percent will save and/or invest the money; 16 percent will fund vacations or the purchase of leisure items.
The survey was conducted by Pollara with an online sample of 1,000 Americans 18 years of age and over, between March 7th and March 10th, 2014. A probability sample of this size would be accurate to +/- 3.1%, 19 times out of 20.
