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Top 10 Tax Planning Ideas for 2019

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As many of you know, I enjoy providing helpful tips for our newsletter and website.  I was on an AICPA Webinar hosted by Robert Keebler, CPA/PFS and he shared some great tax planning ideas for 2019.  Given that the Tax Cuts and Jobs Act of 2017 has some sections that are permanent and some that are temporary, I agree with Bob that these are some great ideas that you should discuss with your tax and financial planning team.

  1. Bracket Management: Timing of income, deductions, retirement plan contributions, investment selections, charitable gifts, etc., to avoid higher tac brackets and the net investment income tax (NIIT).
  2. 3.8% NIIT & IRC 199A Limits: Engaging in various strategies to reduce net investment income or taxable income; i.e., municipal bonds, tax-deferred annuities, life insurance, oil & gas investments, choice of accounting year for estate/trust, or timing of estate/trust distributions.
  3. Income Shifting: Outright gifts to children, LLC and partnership gifts, gifts to non-grantor trusts for family, QSSTs, distributions from existing trusts, or conversions of grantor trusts to non-grantor trusts to shift income, thereby avoiding the higher tax brackets, NITT, & 199A limits for pass-through businesses.
  4. ROTH IRA Conversions: Converting traditional IRAs into ROTH IRAs in order to lower MAGI below the applicable threshold amount in future years, thereby avoiding NIIT.
  5. Charitable Remainder Trusts: Three types of CRTs: Substantial Sale CRT, Retirement CRT, and Income Shifting CRT. Used to harbor net investment income in a tax-exempt environment while at the same time leveling income over a longer period of time, deferring income until after retirement, or shifting income to family members in order to keep MAGI below the applicable threshold, thereby avoiding NIIT.
  6. Maximum Contributions to Retirement Plans:  Especially for Small Businesses, Contributing to retirement plans in order to lower MAGI below the applicable threshold amount, thereby avoiding NIIT.
  7. IRC & 453 Deferred Installment Sale: Used to level net investment income over a longer period of time in order to keep MAGI below the applicable threshold amount, thereby avoiding the NIIT.
  8. Tax Efficient Investing: When designing a portfolio that is coordinated with your tax and financial plan, you should consider the following: 1) increasing investments in tax-favored assets; 2) deferring gain recognition; 3) changing portfolio construction; 4) after-tax asset allocation; 5) tax-sensitive asset location; 6) managing income, gains, losses, and tax brackets from year to year; and 7) managing capital asset holding periods.
  9. Charitable Lead Trusts: These CLT’s can be used to offset net investment income against charitable deductions dollar-for-dollar in a tax-efficient manner, thereby avoiding the NIIT.
  10. Investment in Low Risk Oil and Gas Partnerships: Although they can be risky (“dry holes”), investing in oil and gas partnerships to create a larger deduction in the current year in order to lower MAGI below the applicable threshold, thereby avoiding the NIIT.

Disclaimer: 
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by STA Wealth Management, LLC), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from STA Wealth Management, LLC. Please remember to contact STA Wealth Management, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. STA Wealth Management, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the STA Wealth Management, LLC’s current written disclosure statement discussing our advisory services and fees continues to remain available upon request.

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