Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Buybacks may be the latest fad among corporations and shareholders, but as a way to return cash to shareholders, clients are still advised to consider the advantages of investing in dividend-paying stocks, according to Morningstar. Dividends offer certainty, promote management’s discipline and long-term commitment to giving cashbacks to shareholders, and entail taxes if taxable investors hold stocks in taxable accounts. On the other hand, buybacks indicate flexibility, allow shareholders to choose when to realize a taxable capital gain and create value if executed at a price cheaper that a company’s intrinsic value. -- Morningstar
Clients should look at rebalancing and tax-loss harvesting as a way to earn amid current market volatility, according to CNBC. Tax-loss harvesting will allow clients to replace an investment that has lost value with a similar one, creating a loss that can be deducted from taxes. Investing in small sums regularly can also bring bigger returns in this type of market than putting in a large sum at the start of the decade, as shown by an analysis of 2000 to 2010 data. -- CNBC
Clients are advised to contribute to a Roth IRA as early as after they started working in order to build wealth for their future retirement, according to NerdWallet. Contributions are beneficial as they grow with compounding interest tax-free, even if withdrawn when needed. -- NerdWallet
Clients who opt to itemize deductions can deduct the interest on up to $1 million of a home acquisition and up to $100,000 of home equity debt, according to MarketWatch. They are also eligible to itemize deductions for home mortgage points, refinancing points, mortgage insurance premiums and investment interest expenses. The itemized deduction phased-out rule applies when the adjusted gross income is more than $258,250 for single taxpayers or $309,900 for joint filers. The rule also kicks in when the AGI exceeds $284,050 for heads of households or $154,950 for married couples who file separately. -- MarketWatch
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