SOURCE: BMO Harris Financial Advisors

March 28, 2014 08:00 ET

BMO Harris Financial Advisors Study: Eighty-Seven Percent of Those Surveyed in Illinois Are Confident in Tax Planning, but Many Are Not Tax Efficient When Investing

CHICAGO, IL--(Marketwired - Mar 28, 2014) -

  • Almost half of Illinois residents do their own taxes
  • The overwhelming majority are confident that they take advantage of all tax breaks, but most admit they are not tax savvy when investing
  • Of those expecting a refund for the 2013 tax year, fifty percent plan to use the money to pay household bills and/or reduce their overall debt load

According to a study issued today by BMO Harris Financial Advisors, almost half of those surveyed in Illinois (49 percent, compared to 48 percent nationally) prepare their own tax returns. Further, the overwhelming majority (87 percent, above the national average of 83 percent) 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, 53 percent of respondents (compared to 45 percent nationally) in the state 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:

  • Just 42 percent (below the national average of 44 percent) understand how capital gains are taxed.
  • Fewer than half (44 percent, compared to 47 percent nationally) understand how dividend income is treated from a tax perspective. 

"It's critical that Illinois residents have an understanding of how investments are treated from a tax perspective and take advantage of tax-smart investing options that are available," said Mike Miroballi, President, BMO Harris Financial Advisors.

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.

How Illinoisans plan to use their tax refund

The study also examined what those who expect a tax refund plan to do with the money:

  • Fifty percent (compared to 42 percent nationally) will cover household bills and/or reduce their debt load (credit card balances and debt other than mortgage).
  • Twenty-eight percent will save or invest (below the national average of 35 percent).
  • Twenty-four percent will fund vacations or purchase leisure items (a significant increase from the national average of 16 percent).
  • Thirteen percent will do home renovations.
  • Seven percent will donate their tax refunds to charitable causes.
  • Five percent will allocate their refunds to their mortgages. 

"It's great to see that a significant number in our state will be using at least a portion of their refunds to reduce their overall debt load or to save or invest for the future," 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; 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.

About BMO Harris Financial Advisors
 
BMO Harris Financial Advisors, Inc., offers a comprehensive range of investment advisory products that include financial planning strategies and estate planning strategies to meet the financial needs of high-net-worth clients. Offices are located throughout the U.S. Learn more at www.bmoharris.com/financialadvisors.

BMO Harris Financial Advisors(SM) is a trade name of BMO Harris Financial Advisors, Inc. Securities, investment advisory services and insurance products are offered through BMO Harris Financial Advisors, Inc. Member FINRA/SIPC. SEC-registered investment adviser. BMO Harris Financial Advisors, Inc. and BMO Harris Bank N.A. are affiliated companies. Securities and insurance products offered are: NOT A DEPOSIT - NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY - NOT GUARANTEED BY ANY BANK - MAY LOSE VALUE.

Estate planning requires legal assistance which BMO Harris Financial Advisors and its affiliates do not provide. Please consult with your legal advisor.

United States Department of Treasury Regulation Circular 230 requires that we notify you that this information is not intended to be tax or legal advice. This information cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. This information is being used to support the promotion or marketing of the planning strategies discussed herein. BMO Harris Financial Advisors and its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors.

Contact Information