Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Clients who intend to make charitable donations as a year-end tax-saving strategy need to follow all the rules in order to make the most of the tax deductions, according to The New York Times. For example, taxpayers need to present a receipt if the deduction is at least $250, while IRA investors aged 70½ are allowed to make a direct donation to charity and count it toward their annual minimum distribution. Based on tax rules, taxpayers who claim a deduction on used goods they donated need to assess the items according to their fair market value. -- The New York Times
Clients who consider selling appreciated securities are advised to hold on to these investments for at least a year before selling them, since the long-term capital gains tax rate is lower than the rate for securities held for a short term or less than a year, according to MarketWatch. If they are in a higher bracket, they may consider giving some appreciated stock or mutual fund to a loved one who is in the 10% or 15% brackets, since he or she is not required to pay any federal income tax on long-term gains from the investment. A Roth conversion is recommended if clients don't expect to be in a lower tax bracket in retirement. -- MarketWatch
Clients will be taxed for capital gains and income distributions from mutual funds in a taxable account, and they will need to pay these taxes even if they don't sell any share or decide to reinvest the money back into the funds, according to Morningstar. Selling a fund to avoid any distribution is not recommended, but those who consider including a mutual fund in a taxable account are advised to buy it after it is done with distribution payments to avoid taxes on these returns. -- Morningstar
Contributing to a health savings account is a good tax-saving strategy not only for clients who want to prepare for future medical expenses but for those who are building a nest egg, according to NerdWallet. Clients need to own a high-deductible health insurance plan to qualify for an HSA, which requires pre-taxed contributions. HSA owners can roll over unspent money into the following year and pay no taxes on earnings within the account and withdrawals if the funds will be used for qualified medical expenses. -- NerdWallet
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