Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Alimony in divorce proceedings will no longer be deductible beginning next year as a result of the new tax law, according to this CNBC article. One option for the higher earning spouse to save on taxes is to give an IRA as alimony, suggests Ed Slott, a Financial Planning contributing writer and IRA distribution expert. "When the husband gives the IRA to his ex-wife, he's giving money he would have paid taxes on,” Slott says. “He is in effect getting a deduction."
Although clients may qualify for tax breaks for buying a home, the savings will no longer be as much before the passage of the new tax law, writes an expert on MarketWatch. While some of the tax breaks related to homeownership remain, the new law has increased the standard deduction, making itemizing, through which clients can get those tax breaks, less valuable, writes the expert. However, homeownership can still be a great option, as clients may get sizeable capital gains tax exclusion when they sell their home and meet all the requirements.
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These funds can affordably provide clients with REIT exposure.
September 14 -
These trusts are holding their value and merit an allocation.
June 10 -
In the past, both asset classes served as sources of capital appreciation and income.
June 5
Clients are advised to plan for retirement, as they will run the risk of not being able to retire at all, according to this article on The Washington Post. Older workers who haven't built a nest egg should start saving as soon as they can, reduce spending and maxing out contributions to their tax-deferred retirement accounts, if possible. Creating a source of guaranteed income, like an annuity, is a great hedge against the risk of running out of savings in retirement. They should act now, as “dying at your desk is not a retirement plan,” according to an advisor.
Investors can maximize the benefit of tax-deferred growth of an IRA by parking investments that are subject to high tax rates in the account, according to this article on Nasdaq. For example, clients may place stocks for short-term investment in a Roth IRA, as tax rates for short-term capital gains are higher than the long-term rates. REITs are also good candidates for IRAs, as REIT dividends are subject to ordinary income tax rates, which are higher than those for long-term capital gains.
Specialty REITs, which can include a wide range of investments such as cell towers and college dorms, are on a tear this year. Check out the performance of other major categories.
Clients invested in 401(k)s should avoid holding more than 5% of their total portfolio value in one single stock to ensure they will remain on track for achieving their retirement goals regardless of market conditions, an expert on USA Today writes. When selling a large position, "a more gradual plan to sell down can make sense" to minimize the tax bite but they should first consider how the embedded capital gains will play out, the expert explains. "After all, if the stock craters before selling, you may not have gains to fret over later. I’ve seen a lot of losses created by folks trying to avoid taxes."
