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Affluent clients’ kids can lower tax bills like never before: Tax Strategy Scan

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Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

Your clients’ kids could lower tax bills like never before
This year, millions of American families can enjoy a $2,000-per-child break under age 17 tax break with the expansion of the child tax credit, according to this article from The Wall Street Journal. In addition, the overhaul even raises the full credit income limit. “Many affluent families earning between about $140,000 and $400,000 who didn’t get a tax break for their children in the past, will now qualify for one,” according to one CPA. Here, the expert provides an example of how a family (two parents and three children below age 17) on the 28% tax bracket with $210,000 of taxable income got a savings of $3,400 in tax for 2017 but would receive a $6,000 savings for 2018.


Time for clients to reassess life insurance after tax overhaul
Life insurance policyholders are advised to review their coverage as they can make the most of additional benefits under the new tax law, an expert on Kiplinger writes. For example, those who bought life insurance to cover estate tax will no longer face taxation, as the federal estate-tax exemption has been doubled to $11.18 million this year under the new tax. "So the vast majority of people who originally purchased policies to help cover estate tax are no longer subject to the tax,” the expert writes. “The new law also created more favorable tax treatment for people who sell their policies to investors."

5 smart tax moves you can make right now
Contributing to retirement accounts such as traditional and Roth IRAs is one way clients enhance their tax savings, according to this article from Motley Fool. They should also consider making the most of all available tax breaks available and boost their savings by socking more money in tax-advantaged health savings account or a flexible spending account. Taxpayers can also boost their tax savings by contributing to a 529 plan and seeking professional advice.

The earnings boom isn’t just about lower taxes
Pretax corporate profits rose at an annualized rate of 3.3% in the second quarter, with after-tax profits increasing 2.4%, according to this article on Bloomberg News. Corporate profits in the first quarter prompted analysts to question whether the corporate tax cuts under the new law have a major impact on the earnings report for the quarter. "A lot of solid second-quarter earnings reports seemed to indicate that there was more to it than just tax cuts, and today we have the official if far from final answer from the [Bureau of Economic Analysis]: Corporate profits are on a genuine roll."

A majority of affluent Americans are likely to adjust their financial plans under the new law, according to the AICPA. Here's how advisors can help.
April 19

If the choice is death or taxes, consider charity
Clients may face a hefty capital-gains tax bill when selling appreciated stock held outside a traditional retirement account, according to this article on Press Banner. While they may leave the stock to their heirs to avoid the tax bite, another option is to donate the investment to a charity. As itemized deductions become less valuable under the new tax law, investors can make the most of the charitable tax deduction by "bunching" years' worth of donations using a donor advised trust.

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