Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Why private equity isn’t cheering the tax overhaul
Private equity firms are displeased with the new tax law because of its changes to the way these firms make transactions, according to this article from The New York Times. For example, the rewrite could affect how these firms value potential buyout targets. Private equity firms may not also get their rewards as quickly as before under the new law. “The changes are by no means a death knell for private equity. Far from it,” the expert writes. “But they could seriously disrupt the way potential buyout targets are valued and how quickly private equity magnates can reap their rewards.”
7 new taxes retirees face
Retirees can expect a certain portion of their Social Security benefits to be taxable if the sum of their adjusted gross income, nontaxable interest and 50% of the benefit exceeds $25,000, and $32,000 for couples, according to this U.S. News & World Report article. These clients will also owe taxes on their required minimum distributions from their traditional IRAs and 401(k)s as well as hefty penalties if they fail to take the RMDs for that year. Retirees can no longer defer taxes on their IRA contributions once they reach 70 1/2.
5% dividends, $0 in tax: Here’s how
News about municipal bonds losing value under the new tax law is nothing but a "tempest in a teapot," an expert writes in this article on Nasdaq. "The details are complicated, but the bottom line is that the most important types of municipal bonds will retain their tax-free status," the expert adds. "What's more, too many investors are hooked on getting an income stream the taxman can't touch--meaning demand for these bonds won't go away anytime soon."
Reasons for clients to file taxes early this year
The good thing about filing taxes early is clients can receive their refunds sooner than those who procrastinate, according to this article on Motley Fool. Early filing will also enable taxpayers to avoid tax fraud and give them more time to fix an underpayment. Clients who file early can get rid of the stress associated with the tax season at an earlier time. However, taxpayers should ensure that their return has complete and accurate data to avoid any problems in the future.
The 4 craziest ways clients have legally avoided paying taxes
Some taxpayers were able to avoid paying taxes without incurring any legal liability, according to this article from Aol. For example, a court allows a taxpayer who was caught drunk while driving to claim a tax deduction for his damaged vehicle. Another taxpayer succeeds in getting a tax break for her expenses on caring for stray cats.