Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Investors who have made major gains in the stock market this year can lessen their tax obligations by selling off losses, according to Money. Up to $300,000 in capital gains could be written off under this strategy for those under certain tax brackets. Another way to whittle down taxes is to donate to charitable organizations. -- Money
Retiring clients can minimize their tax bills on their taxable accounts by investing in index-equity funds as these funds generate few taxable capital gains distributions, and also in individual stocks that allow them to pick the date to realize a capital gain, according to Kiplinger. They can also put a limit on their own trading and sell losing stocks to harvest a capital loss that will offset their gains. Selling and buying back appreciated securities is a good tax reduction strategy, while using the specific-share identification method for reporting cost basis on their investments is another option to trim down their tax burden. -- Kiplinger
One of the year-end strategies that clients need to consider is tax-loss selling since it will mean lower taxes to pay for this year, according to MarketWatch. By selling depreciated investments, investors incur losses that can offset their investment gains and subsequently reduce their tax bill. Clients, however, should know that the IRS has a wash-sale rule that prevents a loss deduction from the sale of a security in case they bought back a substantially identical security within 30 days before or after the sale.
Maximizing 401(k) contributions and contributing to a 529 college savings plan are strategies that clients may include in their year-end tax planning, according to U.S. News & World Report. Investors also need to make sure they take their required minimum distributions if they are 70½ years old or older, find opportunities to tax-loss harvest, rebalance their portfolio, and settle debt if possible before the year ends. Going over account beneficiaries, making annual charitable contributions, and postponing the purchase of mutual fund shares in taxable accounts are also recommended for taxpayers to do by year-end. -- U.S. News & World Report
Prepaying all possible deductible expenses is a tax move before the year ends to boost client deductions for 2014, according to Motley Fool. Maximizing contributions to a 401(k) is the most important year-end tax strategy to take advantage of tax benefits the plan provides. Clients may want to review their portfolios and cut investment losses by selling depreciated stocks, a move that will allow them to take "a pretty nice tax break." -- Motley Fool
As the tax extenders bill cleared Congress and is up for President Barack Obama's signature, financial advisors say that many clients have set their sights on donating a portion of their IRA assets to charities to get a deduction and reduce their tax bill, according to The Wall Street Journal. There hasnt been a day since Thanksgiving that we havent gotten multiple questions about this from clients, says Suzanne Shier, a tax strategist with Northern Trust. There are some clients that have been checking in with us on a very regular basis just to see where they are, Shier adds. -- The Wall Street Journal
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- How Your Client Benefits From Donating Stock: Tax Strategies Scan
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