Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Clients should consider including charitable giving in their estate plans to enhance their tax savings, according to this article in Kiplinger. To do so, they can donate appreciated stock, make a direct rollover from their IRAs through a qualified charitable distribution or leave a bequest in their will or revocable trust, according to the article. Clients also have the option of designating a charity as a beneficiary of their retirement accounts or creating a charitable remainder trust and designating it as their IRA beneficiary.
Moving 401(k) funds to an IRA can be a smart strategy for clients who want to better manage their retirement assets, according to this article in TheStreet. The IRA transfer will not trigger a taxable event. For pre-retirees who want to transition from growth to income, transferring their 401(k) assets to an annuity is the better option, according to the article. Aside from guaranteed income in retirement, some annuities also offer tax benefits and are protected in some states from creditors.
Taxpayers are advised to file their tax returns as soon as they can to receive their refund early, according to this article in Fox Business. Filing taxes early will also minimize stress, reduce the odds of identity-theft tax fraud and give clients more time to develop a payment plan. Those who consider hiring a tax preparer will also be better off enlisting the help as early as possible, as the tax professional is likely to be less busy and can provide better customer service.
Clients should know the tax treatment of traditional 401(k)s, Roth 401(k)s, traditional IRAs and Roth IRAs, as well as other differences among these retirement savings vehicles to determine in which account they should invest, according to this article in MarketWatch. Clients should consider a traditional account if they expect to move to a lower tax bracket in retirement, or a Roth account if they think that their current tax bracket is lower than their future tax bracket. Those who are in doubt are advised to diversify their portfolio. “That basically means building both traditional and Roth accounts over the course of your working years, so you have options to pick from — buckets that are treated differently from a tax perspective,” an expert says.
The average expense ratio among the top-performers is 40 basis points higher than the average.
There are financial moves that tax filers can make before the April 15 deadline to boost their tax savings, according to this article in MarketWatch. For example, clients can still make deductible contributions to their IRAs and health savings accounts for tax year 2019, while retirees can make donate their RMDs directly to a charity. Clients are also advised to take advantage of the tax deductions for their Medicare premiums and medical expenses, as well as state and local sales taxes.
