Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Clients should not wait until the year's end to start planning for the 2019 tax season, according to this article on Motley Fool. This is especially true if they have experienced or will experience a major life-altering event, such as marriage, divorce or a new baby. They are advised to organize their financial documents to make it easier for them to prepare the documentation when claiming certain tax breaks. Selling depreciated securities is also recommended to harvest losses that they can use to offset sizeable gains from the sale of stocks that increased in value.
The tax proposal unveiled by the House Ways and Means Committee would allow taxpayers to pay home schooling, apprenticeship fees and student loan debt using funds from their tax-advantaged 529 college savings plans, according to this article on CNBC. "Anything that provides families with more flexibility in how they use 529 plans would be beneficial," an expert says.
The popular industry recruiting and retention barometer provided another window into the challenges facing LPL Financial with its latest major acquisition.
The Wall Street powerhouse has built its wealth division in large part through big deals but is not "looking to make acquisitions just for the sake of it, " said CEO Ted Pick.
But the Bank of America subsidiaries nonetheless reported rises in AUM and net revenue in the second quarter while adding thousands of new client relationships.
Using "break-even" calculators to determine the optimal age to claim Social Security may not be a good move, as there are other factors to consider before making the decision, writes an expert from The Mercury News. For example, older workers who collect retirement benefits early can expect a portion of the benefits to be subject to federal and state income taxes, reducing the "take-home" amount in the process, explains the expert. "In that case, the reward for waiting could come sooner than the standard calculations indicate."
Clients should take advantage of the Opportunity Zone program, which provides substantial federal income tax incentives for those who invest in underserved communities, according to this article from The Las Vegas Sun. Clients in these zones can expect deferral of tax on 2018 gains until 2026, a 15% reduction on the gains when taxed in 2026 and a tax-free growth for investments held for at least 10 years. “A lot of investors will be agnostic and they’re just going to invest in a macro sense for the best deal they think will generate the most appreciation over a 10-year period,” an expert says. "The challenge is finding these opportunities."
A quick look inside the proposed Tax Cuts and Jobs Act.
Seniors are likely to pay unnecessary taxes in retirement if they fail to avoid making financial mistakes before they retire, according to this article on MarketWatch. To improve their future prospects, clients should not assume that they will move to a lower tax bracket in retirement, and they should avoid ending up with a large required minimum distribution from their traditional IRAs and 401(k)s. Clients are advised to max out contributions to their Roth IRAs and Roth 401(k) while they still can, as distributions from these accounts will be excluded from their taxable income.
