Some clients may face a surprise health insurance tax this year: Tax Strategy Scan

Private equity firms may not receive their rewards as quickly under the overhaul, which was signed into law by President Trump in December.
Register now

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

These people might face a surprise health insurance tax this year
Clients who failed to carry health care insurance coverage last year will no longer face a federal tax penalty, thanks to the Tax Cuts and Jobs Act, according to this CNBC article. However, several states, including Massachusetts and New Jersey, will continue to impose the coverage mandates and the penalties on the 2019 tax returns if taxpayers did not comply with the requirement. “The states are reacting; they might want to ensure that they protect their marketplace and health care systems,” says an expert. “They want to make sure people have insurance coverage.”

One way to avoid a potential white-knuckle ride through retirement
Buying an annuity can be a wise move for pre-retirees to protect their income from future market volatility, an investment advisor writes in Kiplinger. Annuities come in different types, and a fixed indexed annuity can be a great choice for most clients because of various benefits, such as guaranteed income, participation in market growth, protection against market drops and inflation-adjusted increases in payouts, he writes. "Investment earnings within the annuity grow tax-free until you begin withdrawals."

Social Security changes in 2020
The 1.6% cost-of-living adjustment in retirement benefits is one of the Social Security changes that retirees should expect this year, according to Fox Business article. Seniors retiring at full retirement age this year may also expect an increase in maximum monthly benefit to $3,011 this year from $2,861 in 2019. Payroll tax rates for workers will also remain the same at 7.65%, with maximum taxable earnings this year increasing to $137,700 from $132,900 last year.

Tax-efficient funds with best 10-year returns
The average expense ratio among the top-performers is 40 basis points higher than the average.

What retirees should know before buying a vacation home
Retirees who want to purchase a vacation home need to make a number of considerations before making a decision, writes an expert in Barron's. "Taxes, maintenance costs, insurance, and potentially rental management expenses are among the factors that can make the difference between a peaceful passive investment and a problematic money pit," he writes. "Depending on the location of the home, the cost of ownership may need to account for property taxes, utilities, and homeowners’ fees, among other things."

7 costly tax mistakes to avoid
Clients who earn more than the standard deduction amount should avoid the mistake of not filing, as it would trigger a tax bill plus penalty, according to this article in Motley Fool. They should also ensure that they pay their taxes on time, report all their taxable income and claim the tax credit or deduction on their returns only if they qualify for that tax break. It is also important that they keep all important tax documents and run the numbers to determine whether itemizing deductions will mean bigger savings than opting for the standard deduction.

For reprint and licensing requests for this article, click here.
Trump tax plan Health insurance Retirement planning Social Security Tax deductions Markets and indexes Fixed annuities