Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Big tax bill looms for mutual fund investors: Clients should take note of these ways to work around taxes that they need to pay once mutual funds distribute capital gains at the end of the year, according to Time Money. Investors who recently bought funds can sell them quickly before gains are distributed or sell stocks or funds that lost money to reap the loss and offset other gains. Clients can also purchase funds after the distribution of gains. Investors should recognize that a 15 percent tax for capital gains is actually lower than regular income taxes. -- Time Money
3 ways to avoid going off a stock market cliff with the buy-and-hold herd: Investors are advised to have an investing plan when the stock market is on the decline, according to Forbes. The buy-and-hold strategy makes a lot of sense, especially for those who are into passive investing, but investors may also consider a strategy that prompts them to buy and sell. Asset class balancing and hedging against a bear market and the IRS are also two other strategies investors can use during a downturn. -- Forbes
4 secrets to getting more from your 529 account: Clients are able to extend the value of their college savings fund if they know the rules governing rollovers, federal tax breaks, and withdrawals, according to Morningstar. Parents may deposit the money earmarked for their children's college bills to the 529 account before making the payment since there may be no waiting period for 529 assets withdrawal, enabling them to deduct the contribution amount on their state income taxes. They can also stretch the value of the fund by rolling in out-of-state 529 assets, coordinating distributions to maximize their federal tax breaks, and keep the unused assets in the plan. -- Morningstar
How taxes and trading costs kill investment returns: Investors need to understand that investments grow because of the compound returns, says Maneesh Shanbhag, founder of asset management firm Greenline Partners. While management fees reduce the investments' ability for growth, individual investors and institutions alike lose more from trading costs and taxes, Shanbhag says. "Reducing your taxes and deferring their payment for longer is a far more dependable way to grow your money than trying to beat markets (even ignoring the headwind of the higher fees and worse tax consequences that often result)." -- Forbes
Tax guide for mutual fund distributions: The tax rules that apply to the distributions of income and capital gains from funds are based on confusing and, sometimes, partial principles, so it is important that investors understand these rules, according to Forbes. These rules are not relevant to funds in IRAs and 401(k) plans, and apply to mutual fund, closed-end fund, and exchange-traded fund companies. Read the 10 basic rules that apply the taxation of these funds. -- Forbes
5 Things You Should Do Now for 2014 Income Taxes: Even though the deadline to file your 2014 taxes isn’t until April 15, you don’t have to wait until the last minute to get the ball rolling. Most Americans do just that, with 20 percent to 25 percent of all taxpayers usually filing during the final two weeks of the tax season, according to the IRS. This kind of procrastination can lead to costly errors and penalties, overlooked deductions and credits, and higher levels of stress. Whether your goal is to owe less money to the IRS in 2014, get a larger tax refund, or catch costly mistakes ahead of time, it’s never too early to start thinking about your taxes. Here are five things to consider doing now. -- NerdWallet
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