If you have money, chances are some of it is in a bank account. Nearly 96% of U.S. households have a checking or savings account at a bank or credit union, according to the latest FDIC data. For most Americans, banks are simply places to hold your money. But banks can also help in other areas – including planning your taxes.
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You might not think of banks when it comes to tax planning because most Americans either do it themselves or hire a tax expert or financial advisor. But a rising number of banks have added tax planning to their lineup of services. Even if a bank doesn’t have a tax expert on staff, it might offer help in other ways, whether through digital tools or educational blogs.
It makes sense that banks would dip their toes into tax planning because of the amount of money involved. Average savings accounts range from less than $50,000 for Americans 35 and younger to nearly $610,000 for those in the 65-74 age group, according to the Federal Reserve Survey of Consumer Finances.
The average checking account balance in the United States is about $8,813, USA Today reported, citing data from the Federal Reserve and University of California-Berkeley. Averages range between about $3,559 for customers under age 35 to more than $14,500 for those 65-74.
With that kind of money in play, it’s important to get as much help as possible with financial and tax planning. Here are six lesser-known ways banks can help you plan for taxes.
General Tax Planning and Preparation
At the very least, most banks will point you in the right direction when it comes to tax planning, even if they don’t provide specific advice. For example, US Bank offers educational tools and other resources to help you maximize your benefits and minimize any surprises during tax season. Wells Fargo provides a tax planning guide that covers areas such as estimated taxes, capital gains, estate taxes, gift taxes and income tax rates.
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Investing
Some banks help you structure your investments more strategically to ensure the best possible tax outcomes. An example is J.P. Morgan Private Bank, which caters to high-net-worth customers. It lets you work with investment professionals to develop plans in areas such as tax-efficient investing and trust planning.
Borrowing
Americans depend heavily on banks and credit unions for loans and lines of credit, whether it’s a mortgage, personal, small business, home improvement or other type of loan. Most loans are not considered taxable income by the IRS, but they do have tax implications — mainly through deductions on the interest paid.
Banks can help you get a better understanding of the tax impact of the loans you get, what they are used for, the way you pay them off, and the interest you are charged.
Charitable Giving
Certain banks provide insights on the tax implications of charitable donations and can help you decide whether to use donor-advised funds, foundations or other vehicles to maximize the value of the donation. Banks can also provide information on frequent changes in tax laws governing charitable giving.
Informational Resources
While banks tend to shy away from providing tax advice, most offer digital tools to help you navigate the U.S. income tax environment. These range from major national banks such as Bank of America and Wells Fargo to smaller regional banks like MidWestOne Bank. Digital resources typically include blogs, web links and FAQ sections. Here are some of the tax topics you can expect to get information on:
- Recent changes in tax laws
- Important documents to gather ahead of tax season
- Tax filing deadlines
- How to get a tax return quickly
- Taxes on IRA and 401(k) distributions
- Mortgage deductions
- Tax-deferred retirement plans
Small Business Taxes
A rising number of banks and fintechs also offer tax planning tools to small businesses, many of which don’t have the time, expertise or resources to plan taxes themselves. This is a key service because of all the sales, income, expense and other transactions that small businesses must keep up with.
Potential tax deductions get “particularly challenging” to track when small business owners commingle their personal and business expenses, according to Raj Bhaskar, co-founder and CEO of embedded software platform Hurdlr.
“Taxes can add up to 40% of a small business owner’s income, and that is too much to not know until tax day,” Bhaskar wrote in a 2023 LinkedIn blog.
Banks can help out by expanding their lineup of tax planning tools to encompass all aspects of a small business, from income and expenses to loans, payroll, investments and retirement plans.
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This article originally appeared on GOBankingRates.com: 6 Lesser-Known Ways Banks Can Help You Plan for Taxes
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