The benefits of transferring to an inherited IRA: Tax Strategy Scan

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

What to do with an inherited IRA
Clients who received an inheritance in a traditional IRA will have to transfer the funds to an "inherited IRA," a financial advisor at Brush News Tribune writes. They will also have to take a taxable distribution from the account every year based on their life expectancy, the expert writes. However, this is not the case if they inherited the assets in a Roth IRA, as contributions to this account were made on an aftertax basis.


Most households are missing out on this tax break
Studies by the Employee Benefit Research Institute have found that some 70% of households are missing out on the tax break for making contributions to a traditional IRA, according to this article on Motley Fool. Clients can reduce their taxable income by contributing to a traditional IRA, which will boost their ability to save for retirement. They will also end up with a sizeable nest egg in an IRA by the time they retire, especially when they start saving early.

Tax strategies to maximize a client's portfolio yield
Municipal bonds are a great investment option as investors looking for tax-free income, according to this article on ETF Daily News. That's because the interest payments from muni bonds are not subject to federal and possibly state taxes. Municipal bonds also are less volatile than high-yield stocks.

Is paying off a home the right move for clients in light of the new law?
Although the new tax law has reduced the tax benefits of homeownership, clients who consider paying off their mortgage should think twice before making a decision, writes a financial adviser on Kiplinger. "[M]y answer to whether a client should pay off his or her mortgage depends upon the individual’s situation," the expert explains. "This is not just a tax decision; considerations go well beyond that."

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.
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Lucrative tax loophole for wealthy clients
The new tax law has retained an old loophole that allows wealthy taxpayers to save considerably on taxes, according to this Fox Business article. This old provision gives clients the ability to choose whether their offshore profits be subject to individual rate or the corporate rate. Under the new law, the corporate tax rate becomes lower than the individual tax rate, making it more sensible for wealthy taxpayers to have their offshore profits taxed at the corporate rate to minimize the tax bite.

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Tax planning IRAs Retirement planning ETFs Munis Roth IRAs Tax loopholes Trump tax plan Corporate taxes
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