Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Clients who invest in publicly traded energy master limited partnerships for better returns and low taxes often find they have tax liability after those companies enter into deals known as roll-ups, according to The Wall Street Journal. Investors who face an MLP roll-up are advised to determine the cost basis and the gains or loss from the deal, and avoid donating MLP units to charity. They also should not put MLP units in an IRA to avoid taxation on certain income. Reporting taxes on MLP income to the IRS can also be complicated and boost tax preparation fees by as much as 200% to 300%.
Tax cuts under the Tax Cuts and Jobs Act will not prompt Americans to boost their spending, according to a study by the New York Federal Reserve reported on by MarketWatch. That's because only 37% of American families expect to gain from the cuts, while 47% don't anticipate any changes in their tax situation, the study found. Some 16% of households expect that their financial circumstances could worsen under the law.
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Congress created a juicy new tax break, yet hundreds of thousands of clients still don’t know if they can claim it.
March 13 -
Sometimes, crunching the numbers shows surprising results. Here’s how advisors can evaluate the tradeoffs of relocating to regions with lower taxes.
March 27 -
Holiday parties and team-building outings may still be deductible. What about entertaining prospects over dinner?
April 24
A 529 savings plan is a great place to save for college, but "it's not the best thing for everyone," a CFP writes on CNBC. A Roth IRA can be better option, as the account is funded with after-tax dollars and provides tax-free withdrawals in retirement, giving account holders an option to tap the savings any time without taxes or penalties. "It gives you the flexibility to save for retirement and use it for education as well," the expert says.
Municipal bonds are a great source of tax-free income, and while recent interest rate increases made these bonds less attractive, the rise and fall of muni bonds are based on a variety of factors, according to this article on Nasdaq. Those who want to boost their muni bond yields should consider closed-end funds. Many of these funds are oversold, creating an opportunity for investors to purchase a great-performing fund at a discount.
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.
Keeping track of expenses and receipts and contributing to retirement accounts are simple financial moves that clients can do to save considerably on taxes but fail to do, according to this article from Motley. Clients are also advised to file a return, report accurate income, avoid mistakes on their returns, or do things that could increase the odds of getting audited by the IRS.
