Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
How tax overhaul hurts many small businesses
The new tax law is a bane for large corporations especially for those that are structured as C corporations, but not for small businesses that are not organized as such, according to a Motley Fool expert. While the law offers a hefty tax deduction for pass-through income, an expert says that the rules can be complicated. "The tax cut for small business pass-through income is a hard-to-understand, convoluted mess that CPAs will be trying to figure out for their clients for months, maybe even years, to come,” the expert writes. “Instead of a large, straight reduction of tax rates on income, the law offers a meager tax cut via a complex formula."
Home loan interest deductions are trickier under the new law
Clients who consider a mortgage or home equity loan are advised to understand the rules for mortgage interest deductions on home loans, which have become "trickier" under the new law, according to CBS Moneywatch. While the law doesn't apply to existing mortgage and home equity loans, it will affect future loans, according to an expert.
Before choosing an annuity, know the tax implications
Clients who consider an annuity are advised to know the tax consequences of their decision, according to CNNMoney. Annuities can be qualified or non-qualified and are subject to different tax treatments. There are also estate tax consequences as well as tax penalties to consider, so consulting an advisor is necessary. "It is also important to discuss the overall financial and investment implications of the annuity with someone other than the person selling the annuity," an expert says.
Why entrepreneurs don't save for retirement
For many entrepreneurs, retirement planning takes the back burner, putting their future security at risk, according to U.S. News & World Report. Planning for retirement includes setting up a retirement account which offers various benefits, such as tax breaks and compounded growth. "In addition to helping to recruit, retain and motivate employees, a well-designed business retirement plan could offer a significant wealth-building opportunity for the owner and employees, not just for their future retirement, but while they are working towards retirement as well," an advisor says.
7 tax tips for new graduates
New graduates will have a peace of mind if they start paying off their student loan debt and saving for retirement, Morningstar's Christine Benz writes. "With a new grad's long time horizon, however, assets invested in stocks within a tax-sheltered vehicle like an IRA or 401(k) plan have one of the highest potential long-term returns of any possible capital allocation," Benz writes. "Return on investment can be a valuable compass for multitaskers throughout their financial lives, helping them identify the best uses of their capital at any given point in time."