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How retirees can reduce their marginal tax rates: Tax Strategy Scan

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

How retirees can reduce their marginal tax rates
Seniors are likely to be in a higher marginal tax rate in retirement because of the taxation of their Social Security benefits, an expert at The Wall Street Journal writes. To avoid this, they should consider contributing to a Roth account instead of a traditional retirement account before leaving the workforce for good. Another strategy is to wait until the age of 70 to start collecting Social Security retirement benefits, the expert writes. "That’s because provisional income includes all 401(k) withdrawals but only half of Social Security benefits."

Tax overhaul offers a mixed bag regarding like-kind exchanges
Real estate investors can no longer opt for like-kind exchanges under the new tax law, meaning they can no longer rely on cost-segregation studies of their property investments, an expert writes at Crain's Cleveland Business. "Cost-segregation studies can provide a big deduction up front, both on the property already owned, and on the property acquired in a like-kind exchange," the expert writes. "However, the deal is not as good as it once was because the personal property identified in the cost-segregation study will now be subject to tax as boot in a like-kind exchange."

Does a delayed refund mean your clients are getting audited?
A delay in tax refund does not always mean that taxpayers could be subject to an IRS audit, according to Motley Fool. Taxpayers who filed their returns electronically usually get their refund within three weeks, and a delay in the refund could mean that the IRS cannot process the return because of an error, such as a wrong Social Security number of wrong bank information for direct deposit option. The IRS may also be overwhelmed with last-minute submissions, and this will require the agency to have more time to process all the returns.

Tax consequences of charitable bequests
When leaving a legacy to a charity, clients are advised to weigh all available options available, as an inheritance may not be the best strategy for them to save on taxes, an expert writes at CNBC. "Today the amount of money you can transfer to your friends and family without paying federal transfer tax is $11.18 million," the expert writes. "This means that if you have $11.18 million or less, you don't need a charitable estate-tax deduction to avoid federal estate tax."

A majority of affluent Americans are likely to adjust their financial plans under the new law, according to the AICPA. Here's how advisors can help.
April 19

How much should clients contribute to an IRA — and how often?
An IRA is a tax-advantaged savings vehicle that complements 401(k) and other workplace retirement plans, according to NerdWallet. While workers should contribute enough to their 401(k) plans to get their employer's matching contributions, directing most of their savings to an IRA is recommended if they have a low-quality 401(k) plan. They may choose a traditional IRA for tax-deferred growth and upfront tax deduction, or a Roth IRA for its tax-free growth on savings and withdrawals in retirement.

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