Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Advisors can help clients determine which ETFs avoid taxable distributions, and which ones don't by providing an overview that breaks down the oft-touted efficiencies of these investments, according to Barron's. Clients need to understand that some of ETFs distribute capital gains, which could mean a tax liability. There also are ETFs that need to sell as part of re-balancing, incurring capital gains that have to be distributed. -- Barron's
From a tax perspective, inheriting mutual funds in taxable accounts can be simpler than selling these funds because of the basis step-up rule, which raises the funds' tax basis to the value at the time of the owner's death, according to the Motley Fool. However, the case is more complicated if the mutual funds are in retirement accounts, where the same rules that govern the original owner applies to inherited funds. Those who inherit mutual fund shares included in the deceased owner's estate will no longer pay taxes since the tax will be deducted before receiving the bequest. -- Motley Fool
Clients should have at least $20,000 to start a scholarship fund, so those who don't have such a big amount start contributing to a donor-advised fund for a number of years to raise the funds, according to Kiplinger While this strategy helps people set up a scholarship fund in a college or community foundation, it also enables them to claim the charitable tax deduction. -- Kiplinger
Clients who are entrepreneurs can save on taxes by claiming deductions for health insurance premiums, qualified education expenses and travel costs, according to Business.com. Business owners can also take advantage of the tax breaks for self-employed 401(k) contributions, exports, association membership fees and clothing bought specifically for a business-related event. Other tax write-offs business owners can make the most of are charitable donations, technology upgrade, tax preparation costs, real estate ownership and bonuses. -- Business.com
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