As we approach the end of 2018, it’s a good idea to review the mutual fund holdings in your taxable accounts and take steps to avoid potential tax traps. Here are some tips. Avoid surprise capital gains Unlike with stocks, you can’t avoid capital gains on mutual funds simply by holding on to the shares. Near the end of the year, funds typically distribute all or most of their net realized capital gains to investors. If you hold mutual funds in taxable accounts, these gains will be taxable to you regardless of whether you receive them in cash or reinvest them in the fund. For each fund, find out how large these distributions will be and get a breakdown of long-term vs. short-term gains. If the tax impact will be significant, consider strategies to offset the gain. For example, you could sell other investments at a loss. Buyer beware Avoid buying into a mutual fund shortly before it distributes capital gains and dividends for the year. There’s a common misconception that investing in a mutual fund just before the ex-dividend date (the date by which you must own shares to qualify for a distribution) is like getting free money. In […] Details
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If most of your money is tied up in your business, retirement can be a challenge. So if you haven’t already set up a tax-advantaged retirement plan, consider doing so this year. There’s still time to set one up and make contributions that will be deductible on your 2018 tax return! More benefits Not only are contributions tax-deductible, but retirement plan funds can grow tax-deferred. If you might be subject to the 3.8% net investment income tax (NIIT), setting up and contributing to a retirement plan may be particularly beneficial because retirement plan contributions can reduce your modified adjusted gross income and thus help you reduce or avoid the NIIT. If you have employees, they generally must be allowed to participate in the plan, provided they meet the qualification requirements. But this can help you attract and retain good employees. And if you have 100 or fewer employees, you may be eligible for a credit for setting up a plan. The credit is for 50% of start-up costs, up to $500. Remember, credits reduce your tax liability dollar-for-dollar, unlike deductions, which only reduce the amount of income subject to tax. 3 options to consider Many types of retirement plans are […] Details
A tried-and-true year-end tax strategy is to make charitable donations. As long as you itemize and your gift qualifies, you can claim a charitable deduction. But did you know that you can enjoy an additional tax benefit if you donate long-term appreciated stock instead of cash? 2 benefits from 1 gift Appreciated publicly traded stock you’ve held more than one year is long-term capital gains property. If you donate it to a qualified charity, you may be able to enjoy two tax benefits: If you itemize deductions, you can claim a charitable deduction equal to the stock’s fair market value, and You can avoid the capital gains tax you’d pay if you sold the stock. Donating appreciated stock can be especially beneficial to taxpayers facing the 3.8% net investment income tax (NIIT) or the top 20% long-term capital gains rate this year. Stock vs. cash Let’s say you donate $10,000 of stock that you paid $3,000 for, your ordinary-income tax rate is 37% and your long-term capital gains rate is 20%. Let’s also say you itemize deductions. If you sold the stock, you’d pay $1,400 in tax on the $7,000 gain. If you were also subject to the 3.8% NIIT, […] Details
Many employers routinely watch key financial metrics, such as current ratio and gross profit. But these aren’t the only measures you should consider monitoring. Recent years have seen the emergence of vital human resource (HR) metrics. These measures can help your organization make better-informed decisions about human capital, operations, and overall strategy. Here are three examples of critical HR metrics: 1. Turnover The turnover percentage is calculated by dividing the number of terminations (voluntary and involuntary) for a specified period by the average headcount and multiplying that number by 100. Turnover is a good indicator of your company’s culture and health overall, but you also can apply it on a more granular demographic level. Looking at turnover for your high performers or Millennials, for example, can give you valuable insight on how well you’re managing these employees. High turnover among new hires could suggest problems with your recruiting or onboarding processes. 2. Average time to fill This metric is useful in assessing the efficiency of your recruiting process. It’s calculated by dividing the amount of time it’s taken to fill all roles (that is, the total days all positions were open) by the total number of openings filled. Higher numbers […] Details
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