Our weekly roundup of tax-related investment strategies and news our clients may be thinking about!
The ABCs of ETF tax-efficiency; Don’t forget ETFs aren’t exempt: Advisors can help clients determine which ETFs avoid taxable distributions, and which ones don't, by providing an overview that breaks down the oft-touted efficiencies of these investments, according to Barron's. Clients need to understand that some ETFs distribute capital gains, which could mean a tax liability. There also are ETFs that need to sell as part of rebalancing, incurring capital gains that have to be distributed. -- Barron's
Taxes on inherited mutual funds: From a tax perspective, inheriting mutual funds in taxable accounts can be simpler than selling these funds because of the basis step-up rule, which raises the funds' tax basis to the value at the time of the owner's death, according to the Motley Fool. However, the case is more complicated if the mutual funds are in retirement accounts, where the same rules that govern the original owner apply to inherited funds. Those who inherit mutual fund shares included in the deceased owner's estate will no longer pay taxes since the tax will be deducted before they receive the bequest. -- Motley Fool
How to set up a scholarship fund: Clients should have at least $20,000 to start a scholarship fund, so those who don't have such a big amount should start contributing to a donor-advised fund for a number of years to raise the funds, according toKiplinger. While this strategy helps people set up a scholarship fund in a college or community foundation, it also enables them to claim the charitable tax deduction. – Kiplinger
13 genius tax write-offs your clients need to take advantage of: Clients who are entrepreneurs can save on taxes by claiming deductions for health insurance premiums, qualified education expenses and travel costs, according to Business.com. Business owners can also take advantage of the tax breaks for self-employed 401(k) contributions, exports, association membership fees and clothing bought specifically for a business-related event. Other tax write-offs business owners can take include charitable donations, technology upgrades, tax preparation costs, real estate ownership and bonuses. -- Business.com
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