As tax season approaches, many clients face the challenge of managing significant tax payments. For financial professionals, this is a prime opportunity to help their clients explore options that can ease the financial burden while maintaining their financial strategies.

By suggesting the use of a line of credit—a flexible, cost-effective solution—financial professionals can allow clients to manage their cash flow and avoid liquidating long-term assets. Using a line of credit can offer faster access to liquidity, flexible repayment terms and are low-cost to maintain, making it an attractive option for covering tax payments.

How to Approach the Conversation with Clients

When speaking with clients about using a line of credit to tackle their tax payments, it’s important to frame the conversation in terms of flexibility, control, and strategic financial management. Here are some helpful speaking points for financial professionals:

1. "This option gives you flexibility in managing your cash flow."
   Whether the client is a business owner or someone with irregular income, using a line of credit for tax payments allows them to keep their assets intact while managing cash flow according to their needs. The flexibility in repayment terms can be especially appealing for clients with variable income or cash flow cycles.
2. "You don’t have to liquidate your investments to meet your tax obligations."
   Many clients may be reluctant to sell assets or investments to cover their taxes. A line of credit removes this concern by giving clients access to liquidity without affecting their long-term portfolio strategy.
3. "It’s one of the fastest, most cost-effective ways to get the funds you need."
   Lines of credit are generally quicker to access than traditional bank financing, and with competitive interest rates, they offer a more affordable borrowing option. Stressing the cost-effectiveness and speed of this option can make it an appealing choice for clients.
4. "Repayment terms are tailored to your situation."
   Most lines of credit, especially those backed by portfolio assets, offer customizable repayment schedules. This means clients can align their repayment plans with their personal or business cash flow, avoiding rigid bank loan schedules.

By understanding the benefits of using a line of credit for tax payments, financial professionals can guide their clients toward a solution that aligns with their financial goals, helping them manage tax obligations with greater ease and efficiency.

For the 2024 tax year, here are federal income brackets and rates to be mindful of:¹

Capital Gains Tax Rates²

Take the Next Step in Advising Clients

The Bancorp's Institutional Banking team brings over 20 years of experience in delivering tailored banking solutions for financial professionals and non-bank institutions. Our team works closely with financial professionals to understand their clients' wealth management strategies, offering top-tier support without the competitive concerns that often come from other banks.

As financial professionals look ahead to managing 2024 tax obligations, a line of credit can serve as a strategic tool to cover tax payments and other living expenses, all while preserving portfolio assets and assets under management.

Discover how we can support you and your clients by visiting The Bancorp Institutional Banking at institutionalbanking.thebancorp.com/lending-services.