Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
There are available strategies that taxpayers can adopt to reduce their excess Modified Adjusted Gross Income or Adjusted Gross Income if it will be subject to net investment income tax, according to Forbes. Taxpayers may opt for a Roth IRA Conversion especially if Social Security and distributions from retirement plans will push their income beyond threshold amounts, or make charitable giving to reduce their MAGI. Receiving staggered payment for the sale of an asset is also a good strategy, while a taxable income can also be reduced by boosting above-the-line deductions and exclusions. -- Forbes
Some clients fail to differentiate tax deductions from tax credits, but both are different from each other in the sense that deductions are reductions from one's taxable income; while credits are standard among qualified taxpayers, and phases out at determined income brackets, according to Motley Fool. However, the complex nature of some tax laws could be overwhelming for some clients, and getting expert help may be useful to ensure that computations are lawful and accurate. -- Motley Fool
Although capital gains and dividend tax rules are already familiar to most investors, clients need to understand the tax rules for some investment types so they can maximize their returns and curb their tax obligations, according to Motley Fool. These investment types with lesser known rules include REIT preferred stocks, exchange-traded notes, master limited partnerships, and dividends from foreign companies. -- Motley Fool
Clients who consider withdrawing from their 401(k) plan to pay off their mortgage may avoid paying 10% penalty but the withdrawal could raise their marginal tax rate, according to this article on USA Today. They should account for the rate of interest on their mortgage, which would be deducted from their tax return. A good financial strategy is to keep tax-deferred 401(k) money and mortgage interest deduction as they could write off each other. -- USA Today
For some time now, Warren Buffett and Bill and Melinda Gates have been goading fellow billionaires to follow their lead and pledge to give away at least half of their fortunes to charity. More than 120 have agreed, which has in turn inspired many of America's millionaires-next-door to make a deeper commitment to philanthropy. It doesn't hurt that the wealthy are feeling wealthier these days, thanks to the years-long run-up in the stock and real estate markets and the lofty prices many businesses are fetching due to a robust acquisitions market. -- CNBC
The $11.5 billion Burger King Worldwide (BKW) deal to buy coffee-and-doughnut chain Tim Hortons and reincorporate in Canada will proceed, despite an Obama administration crackdown on corporate inversions, the firms said Tuesday. The response came after Monday night's Department of the Treasury announcement of new rules that could make it more difficult and less profitable for U.S. firms to pursue inversions move their official addresses overseas in a bid to lower future taxes and gain freer use of cash held in foreign subsidiaries. -- USA Today
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