Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Clients who incurred losses from the recent market turmoil can minimize the impact by selling poor-performing securities and use the losses to offset capital gains taxes, according to The Wall Street Journal. Another option is tax-loss harvesting, which allows investors to sell a losing position and buy a similar security. Although clients can improve their tax position with tax-loss harvesting, they need to be careful when using this strategy as it could lead to major pitfalls, such as increased capital gains tax and issues involving IRS rules. -- The Wall Street Journal
Clients receiving retirement, spousal and other benefits from Social Security can expect their benefits to be taxable if they file a joint tax return and the combined income exceeds $32,000, according to Money. Half of the benefits will be taxable if the combined income is between $32,000 and $44,000, while retired couples receiving more than $44,000 in combined income will have 85% of their benefits taxed. Combined income is determined by adding half of the household's Social Security benefits to adjusted gross income and any nontaxable interest the couple receives. -- Money
Non-spousal beneficiaries of an inherited retirement account may defer taxes by rolling over the distribution to their own IRA via a direct trustee-to-trustee rollover, according to MarketWatch. The required minimum withdrawal rules for inherited IRAs apply to the balance in their receiving IRAs. The taxes they will pay depend on the amount of annual required withdrawal, which is determined based on the IRA balance and the applicable single life expectancy divisor based on their age. -- MarketWatch
Clients who want to reduce their tax burden may consider municipal bonds, which are exempt from local and state taxes, according to The Motley Fool. When choosing municipal bonds for their portfolio, clients are advised to pick those with a strong credit rating, and which are issued by larger municipalities. They should avoid municipal bonds from regions with a struggling economy and to make sure the bonds they will buy are indeed tax-free, since some muni bonds are subject to local and state taxes. -- The Motley Fool
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