Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
The self-employed can use an IRA to put away for retirement and boost their savings at tax time, according to this Motley Fool article. Employers can make contributions to a SEP-IRA for all their employees, while small employers who hire fewer than 100 workers may opt for a Simple IRA. Self-employed individuals also have the option to contribute to a traditional IRA and Roth IRA, although these accounts have lower contribution limits.
IRA investors who want to convert some of their assets into Roth may want to do it now, as the current administration seeks to cut tax rates this year, according to this article from Bloomberg. The Roth conversion triggers a tax liability, and lower tax rates will reduce the tax bill, according to an expert. “Tax rates may never get lower in your lifetime than in 2017. Now would be the time to strike.”
Fifteen tax planning tips from analysts and industry experts advisers may consider in 2017.
Although a health savings account is funded with pretax money and offers tax-free investment growth and withdrawals for qualified medical expenses, the account's hefty fees and limited investment options can offset these benefits, according to Morningstar. Clients who are stuck in a poor, employer-provided plan may want to set up another HSA. The employee should then consider transferring the funds directly to the new HAS, according to the research firm’s personal finance director. Clients may also do a rollover — withdrawing from their employer-provided HSA before depositing it into the new account.
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When a tax-deferred account is part of an estate, failure to follow the tax rules correctly can result in a financial disaster.
February 17 -
Clients who make these prohibited transactions can face devastating penalties.
February 1 -
How IRA conversions can come at a steep price for clients. Plus, ways to dodge a surprise bill from the IRS.
February 27
Baby boomers have the option to pay their grandchildren's preschool fees and save considerably on gift taxes, according to this CNBC article. They may also pay these expenses and count the payments towards their lifetime gift limit exemption, which amounts to $5.49 million. "The numbers are real and they can be significant," an expert said.
Investors who gained from the robust market performance in recent years should consider reducing their stock holdings to ease the negative impact from a market downturn, according to this Kiplinger article. They may reduce stock investments to rebalance their portfolio back to their original asset allocation. Selling stocks could trigger tax liability, so it's important that they apply the right tax rates on their capital gains. Profit from the sale of investments held for less than a year is subject to short-term capital-gains tax rates, which are higher than the tax rates for gains from selling stocks owned for more than a year.
