Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Retirees can save substantially on taxes if they live in Washington, Texas Alaska, Florida, Nevada and Wyoming, where Social Security benefits, pensions and other retirement income are not subject to income tax, according to Kiplinger. They can also save on their tax bill if they opt to reside in New Hampshire and Tennessee, where only their dividend and interest income will be taxed. However, these states impose higher sales and property taxes to make up for lost revenue for not taxing retirement income.
Although the IRS generally doesn't treat legal expenses as tax-deductible, clients can deduct these expenses if the costs are related to an active business, according to MarketWatch. Clients also can deduct legal expenses if they were incurred in the course of collecting wages, unpaid insurance claims, alimony and other income, as well as computing and claiming a tax refund. Legal expenses from discrimination lawsuits and collection of whistleblower awards can also be tax-deductible. -- MarketWatch
Clients may not need to present receipts when claiming tax deductions if they can prove those tax-deductible expenses using some other means, according to Forbes. A recent tax case overturned an IRS decision to disapprove a taxpayer's deduction claims because of a lack of receipts may have set the precedent for others to file without documentation. An appeals court argued that the IRS should allow the deductions if taxpayers can present “other credible evidence” to prove they really incurred the expenses. -- Forbes
Market volatility creates opportunities for clients to save on their tax bill, according to The Wall Street Journal. These opportunities include realizing losses to offset gains, making contributions to retirement accounts, and converting to a Roth IRA. When markets dwindle, clients can also reduce their taxes by undoing a Roth conversion, taking advantage of employee stock options and giving assets as gifts to loved ones. -- The Wall Street Journal
Clients are advised not to expect too much from their shares of U.S. companies that moved their business operations to a lower-tax domicile, such as Ireland, according to USA Today. Data from S&P Capital IQ shows that 10 of the S&P 500's firms based in Ireland have been trailing behind market performance over the last 12 months, dropping at an average of 15% during the period. -- USA Today
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