Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Taxpayers who are planning for charitable donations this year-end should consider bunching their donations or using a donor advised fund to maximize the tax benefits, an expert for Kansas City Journal writes. Clients who are at least 70 1/2 have the option of donating directly from their IRAs to a charity through a qualified charitable distribution. The QCD will be counted towards their required minimum distributions without owing any taxes on the withdrawal. “With the current strong stock market, a donation of long-term appreciated securities continues to be one of the most tax advantageous ways to give,” an expert writes. “By transferring the securities to a charity, you avoid the capital gain and also get the charitable deduction for the contribution.”
Clients have until October 15 to undo their Roth conversion done in 2017, with this investing move no longer allowed beginning this year thanks to the new tax law, according to this article on CNBC. Recharacterization of a Roth conversion from traditional IRA is a great option if the converted assets decline in value and trigger substantial tax liability. "It's not the worst thing in the world. You still have a Roth. But if you want to give it one more look to see if the conversion worked out, this is your chance and the window is closing,” according to IRA expert Ed Slott.
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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
Although the amount of income subject to Social Security tax is capped using the Social Security wage base, payroll taxes are likely to increase next year as the wage base is expected to increase, according to this article on Motley Fool. The wage base increase would mean no substantial payroll tax increase for low-income workers. However, for high-income workers, the wage base increase could mean a $400 jump in payroll tax.
The IRS has issued regulations for the implementation of the 20% deduction for qualified business income from pass-through entities created by the new tax law, according to this article on MarketWatch. Businesses eligible for QBI deduction should meet the definition found in IRS Code Section 162. Limitations for the tax break also start to phase in when the taxable income is more than $157,500 ($315,000 for joint filers).
What some clients tried to claim on their tax returns shows they often don't know much about accounting.
Thanks to the new tax law, real estate investment trust investors now qualify for a tax break on their "nonqualified" dividends, as the income is considered tax deductible pass-through income, according to this article on ETF Daily News. Other investment options that offer significant tax savings are municipal bonds and closed-end funds. Moreover, qualified dividends are subject to a more favorable tax rate than ordinary income.
