Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
A year-end financial housekeeping is necessary for clients to save on taxes as they file their tax returns in April, according to The Wall Street Journal. Tax-saving moves include using up their flexible spending plans, setting up a self-employed 401(k) account by Dec. 31, and making a Roth IRA conversion especially if the asset values continue to increase. Mutual-fund investors are also advised to use their losses to offset investment gains, which may have increased as a result of capital-gain distributions and subsequently raised their taxable income. -- The Wall Street Journal
A three-pronged approach that will enable clients to save on taxes includes deferring income until 2015, increasing possible exemptions, deductions and charitable contributions, and placing their investments "on the fast track," according to CNBC. Taxpayers can also protect their income from taxes by boosting contributions to their 401(k) plans and other tax-free retirement accounts. -- CNBC
With the year drawing to a close, clients are advised to review their taxable accounts to determine how much capital gains in the accounts will distribute, according to The Wall Street Journal. After doing that, the client can check whether there are capital loss carry-forwards available to offset the distribution or check if there are positions to sell at a loss to offset gains. Investors who are over seventy-and-a-half years old are also advised to check their retirement plan to ensure compliance with the required minimum distribution requirements. -- The Wall Street Journal
Taxpayers who have to do tax-loss harvesting before the year ends need to know that short-term capital losses are used to offset short-term gains and any excess can be applied to long-term gains, according to Forbes. The same rules also apply to long-term capital gains, which are subject to 25% tax rate for real estate recapture and 28% for collectibles. Taxpayers can also use capital losses in excess of capital gains to offset as much as $3,000 of their ordinary income. Read more about the tax rules on capital losses as well as strategies on how to take advantage of these losses. -- Forbes
Clients need to account for taxes and to have smart tax management when developing and implementing an investment strategy, according to Forbes. The after-tax return should get an increased focus in investing, as they have more control over the taxes they pay on investment gains than other aspects of investing. -- Forbes
Clients can save money on taxes next year if they offset their investment gains with losses, max out contributions to their retirement plans, and take out their minimum required distributions from their retirement plans if they turn 70 1/2, according to U.S. News & World Report. They can also reduce their tax bill by giving financial gifts of up to $14,000, using their flex spending plans, and paying medical insurance premiums and other expenses. Other tax reduction strategies are paying January mortgage payment by end of December and combining Schedule A deductions. -- U.S. News & World Report
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