Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Despite the changes that came with the Tax Cuts and Jobs Act, clients can still claim the child and dependent care tax credit on their 2018 returns, according to this CNBC article. Working parents who paid for day care, summer camp or a babysitter should take advantage of this tax break, which can help them save as much as $1,050 per child below age 13. Those who intend to claim are advised to pay their babysitter legally and remit the necessary employment taxes. "In general, the nanny tax is paid as part of your tax return," an expert says.
Taxpayers will be better off opting for the standard deduction instead of itemizing their tax deductions if their mortgage interest payment is that much, according to this article on Yahoo Finance. The standard deduction could also be a better option if they used the deduction for state and local taxes and donated a small amount to charity. Those who incurred medical costs below 7.5% of their adjusted gross income this year will also stand to gain more from the standard deduction than itemized deduction under the new law.
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Clients are willing to pay more for tax advice, but they’re still not getting it.
October 24 -
Recent tax laws added complexitynot to mention sticker shockto clients tax obligations. But with smart planning, you can alleviate some of the pain.
November 3 -
You’ll probably find administrators blocking the backdoor Roth IRA strategy more than anyone else, says Kimberly Foss, planner, author and Financial Planning contributor. That’s when you’ll have to adopt the role of educator, she says.
October 18
ETF investors can expect minimal tax liability by the end of the year, thanks to the funds' tax-efficient structure, a Morningstar expert writes. However, ETFs "that move beyond the area of plain-vanilla may be more susceptible to capital gains distributions," the expert warns. "Tax-conscious investors would do well to understand the tax implications of more complex ETF strategies, and scrutinize the tax record of these strategies before investing."
Business owners are advised to consult their tax advisor to avoid costly mistakes as a result of misunderstanding the tax deductions under the new tax law, according to this article on Entrepreneur. When doing year-end tax planning, business owners should remember that they can transfer business valuations and minority interests to their children. They should also make the most of the depreciation on businesses and real estate for equipment. Moreover, the loan made against a business or real estate is not considered taxable.
What some clients tried to claim on their tax returns shows they often don't know much about accounting.
Conventional wisdom dictates that retirees who need to generate income from their portfolio should draw from taxable accounts first before tapping their tax-deferred and Roth accounts, according to this article on TheStreet. However, this approach could result in bigger taxation on income, a T. Rowe Price advisor says. This strategy also does not account for the tax circumstances of both retirees and their heirs, the expert adds.
