Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Divorcees are not allowed to deduct life insurance premiums from their alimony if laws require them to maintain the coverage with their former spouse as a beneficiary, according to this MarketWatch report. They can, however, deduct the premiums if they make the payments on behalf of their ex-spouse. “Generally, when the former spouse is required, under the divorce decree or agreement, to own and maintain a policy as security for post-death payments, installment premiums of the proceeds would be taxable as alimony to the recipient spouse,” an expert says. “Payments from an insurance trust that is established to discharge post-death obligations are also fully taxable to the recipient spouse.”
A report from Fidelity Investments says a 65-year-old couple set to retire this year should have at least $275,000 in savings for their health care expenses throughout their golden years, according to Bloomberg. This year's estimate increased 6% from last year's figure. Although the couple will qualify for Medicare, the premiums for Part B and Part D will represent 35% of these costs, while buying a supplemental Medigap will not change the estimate. Advisors should recommend clients to sock away money in a health savings account, which is funded with pre-tax money and offers tax-free growth on savings and tax-free withdrawals for qualified medical expenses.
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Advisers with their own practices would see their tax rates cut to 15% under the new proposal.
April 27 -
Health savings accounts are not only for funding immediate medical needs. They offer three distinct tax benefits that make them a powerful form of retirement savings.
June 16 -
Here’s what advisers should know about this increasingly available option, so they can help clients make the most educated choice.
May 31
Aside from being low cost, index funds and ETFs are popular among investors for simplicity. Investors are picking these investments to diversify their portfolio in a less complicated way, writes Morningstar’s Christine Benz. The type of investment option that clients choose is driven by idiosyncratic risk factors. For example, employees face tax consequences for holding too much of their employer's equity, and should keep the rest of their portfolio diversified by downplaying the sector in which their company belongs and increase their exposure to other industries. For retirees, the goal is to keep their equity exposure to curb longevity and inflation risks, avoiding big allocations in specific stocks or sectors.
Although the IRS has yet to comment on Bitcoin Cash, experts say that investors may owe taxes on the windfall, according to this Wall Street Journal article. A specialist says the tax liability on Bitcoin Cash receipts could be based on technical reasons, and this could mean the windfall would be treated as ordinary income. As such, tax rates for the receipts could go as high as 39.5%.
Fifteen tax planning tips from analysts and industry experts advisers may consider in 2017.
Nobel Prize-winning economist Robert Shiller said the housing market would experience a "rather small effect" if the government decides to lower the limit on mortgage interest rate deductions, according to CNBC. The tax break is "limited to a small percent of taxpayers. It's just not that big an effect compared to the big things," Shiller said. "What's really driving the real estate market is our sense of where we're going and the uncertainty at the time with the new administration in Washington and all this talk."
