How to cut your clients’ 2019 tax bills before it’s too late: Tax Strategy Scan


Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

How to cut your clients’ 2019 tax bills before it’s too late
Now is the time for taxpayers to make moves to lower their tax liability for 2019, according to this article in MarketWatch. For example, clients should consider paying more deductible expenses before year-end if their total itemizable tax deductions will be close to their standard deduction amount. They may also harvest losses in their taxable investment accounts to write off their taxable gains. Another option is to donate shares that have appreciated in value to charity to avoid capital gains taxes.

Clients should consider adjusting their withholdings as a result of the new tax law.

Clients harvesting tax losses? Don’t delay or it’ll cost them
Investors who consider harvesting losses for tax purposes will be better of selling depreciated shares now than waiting until the year-end to dispose of these shares, according to this article in Motley Fool. That’s because these prices are expected to drop further at the end of the year, which could add to investment losses. Clients will also have more time to comply with the wash sale rules in case they intend to buy back the stock by the year’s end after claiming a tax loss.

What your clients’ LTC insurance won’t cover
Clients with long-term care insurance are advised to make a plan as the insurance may not cover all their long-term care costs, writes a Forbes contributor. They should avoid over-insuring themselves if they have limited income and instead buy a “whole life” insurance policy, which offers tax-free death benefit when used for their own care, the expert says. “Remember that having liquidity in your portfolio will eventually be more important than tax deferral, and paying your taxes sooner rather than later… actually increases your financial security as you age.”

Your clients could be missing out on this employee benefit
Roughly 75% of companies offer employee stock purchase plans, however they often have very low employee participation, according to a survey by Deloitte in this CNBC article. Employees stand to benefit from an ESPP, which offers discounts on company shares. Workers can easily gain by selling the company shares, but they should consider the taxes before selling these shares. They are advised to hold the investments for at least two years before selling to qualify for long-term capital gains.

7 questions to ask before swapping clients’ mutual funds for ETFs
Clients who consider shifting from mutual funds to ETFs have to make a number of considerations before making a decision, writes Morningstar’s Christine Benz. Switching into ETFs could be a smart move in the long term if the funds are held in a taxable account, although selling the mutual funds could trigger capital gains taxes, she says. “If you don’t have significant capital gains, or you even have a loss in your holdings since you purchased them, you may more readily realize a benefit — either by lowering your expense ratios or improving your portfolio’s tax efficiency — by opting for ETFs.”


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