Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Charitable donations dropped by $54 billion this year after the implementation of the Trump administration’s Tax Cuts and Jobs Act, which increased standard deductions by twofold but reduced charitable giving incentives, according to this article from Newsweek. Overall donations to charity organizations declined by 1.7% last year, while total individual giving dollars decreased by 1.1%, the first drop since 2013, according to a Giving USA report. Legislation introduced by Rep. Chris Smith, R-N.J., would permit charitable tax deductions outside of standard deductions in efforts to encourage taxpayers to continue charitable giving.
National Taxpayer Advocate Nina Olson has issued "the Taxpayer Roadmap 2019," which shows how difficult it is for Americans to navigate the tax code, according to this MarketWatch article. “It is my firm belief that taxpayers must have knowledge about their rights within a bureaucracy as complex as the IRS,” the official says. “If only taxpayers who are represented by tax professionals have access to that knowledge, then we do not have a fair and just tax system.”
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Advisers with their own practices would see their tax rates cut to 15% under the new proposal.
April 27 -
Many of the president's "core principles" were similar to promises he made on the campaign trail, including a reduction to 15% in the rate for businesses.
April 28 -
The plan would be paid for partly with the elimination of deductions and loopholes for the wealthy, raising fears over tax-exemption.
April 26
Equity compensation, such as stock options and restricted stock units, can be a great perk that working clients can get from their employers, however it comes with complexity, including tax consequences, according to this CNBC article. To mitigate the tax exposure, workers should get professional advice and create a tax strategy. “If you exercise this amount, what are the income consequences and how far can we go in the income tax bracket? It must fit into your overall financial plan, too,” an expert says.
The IRS has released a draft tax form specially intended for seniors, according to this Kiplinger article. Form 1040-SR, or the "U.S. Tax Return for Seniors," was required by the 2018 Bipartisan Budget Act to make tax filing easier for retirees. The use of the new form is optional, meaning senior clients may consider using the current form.
The average expense ratio among the top-performers is 40 basis points higher than the average.
Alimony deductions are no longer available under the new tax law, however there are ways for soon-to-be-divorced couples to minimize the tax bite, according to this Forbes article. For example, they can make alimony payments using IRA funds at pretax values or a charitable remainder trust. Divorcing couples with large gains on stocks, mutual funds or real estate will also be better off with a lump sum transfer to pay the alimony obligation.
