Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Municipal bond investments are a smart choice for most clients because their interests are generally not subject to federal income tax, according to CNBC. These assets are sensible options to place in taxable accounts, especially for residents of high-tax states like New York or cities with income taxes. However, it may not be wise to concentrate only on local municipal bonds. It is best to diversify a portfolio and be exposed to other tax breaks from other investment vehicles. -- CNBC
Clients need to itemize their tax deductions so they can deduct their out-of-pocket medical expenses, according to Kiplinger. The deductible amount for medical costs should not be more than 10% of their adjusted gross income, or 7.5% of AGI for those aged 65 and above. Aside from prescription drugs and other medical items not covered by insurance, other expenses that can be deducted as medical expense are the cost of eyeglasses and contact lens, chiropractor visits, and 23 cents a mile for driving to get a medical service. -- Kiplinger
In this story, a financial advisor tells a couple with a net worth of $1.25 million to set up IRAs and roll over their 401(k) and 403(b) funds into these accounts, according to The Wall Street Journal. They are also advised to name each other as primary beneficiary and to name their two daughters as contingent beneficiaries. This strategy will enable the couple to reduce the tax burden once either of them dies, the adviser explains. -- The Wall Street Journal
Clients who consider including municipal bonds in their portfolios are advised to account for a number of factors, such credit quality considerations and the bonds' sensitivity to interest rates. They further need to look at their time horizon and risk capacity, as well as their tax position, before deciding whether to invest in these bonds. Clients may also look at muni-bond funds, which are another option to individual municipal bonds and check the expenses for buying these bonds. -- Morningstar