FOCUS
0
0.5
1.0
$1.5 TRILLION
FISCAL YEAR DATA (OCTOBER THROUGH SEPTEMBER) SOURCE: TREASURY DEPARTMENT
ANNUAL INDIVIDUAL FEDERAL TAX COLLECTIONS
1988 2000 2005 2010 2015 2018
$1.68
TRILLION
32
FORTUNE.COM // MAY.1.19
The array of recent changes to the tax code left
investors dizzy this year. But these four moves could
save you money over the long haul. By Erik Sherman
Revisit REITs Pass-through businesses like
partnerships, LLPs, and sole proprietorships
are the big tax-change winners. If they meet
certain standards, they get to deduct 20%
of their profits before calculating taxes. “It
was intended for small businesses, but it
also applies to REITs [real estate investment
trusts] if they have the right structure,” says
Cal Brown, a financial adviser with Savant
Capital Management. With REITs looking at
lower tax bills, that can mean more profit to
divvy up among investors like you.
Go Local Many have been hampered by the
2017 tax changes’ $10,000 limitations on
state and local tax (SALT) deductions. One
way to save on state taxes? Move some of
your portfolio to Treasuries and municipal
bonds issued in your state, which would
be tax exempt at the state level, says Eric
Bronnenkant, head of tax at online financial
adviser Betterment. The savings may out-
weigh the additional interest you’d earn on
taxable higher-yield bonds.
Ask to Pay Commissions In recent years,
that advice would have sounded crazy, as
clients gravitated toward fee-based advisers.
However, with the deduction for adviser
fees gone, paying commissions might make
sense, says Paul Gevertzman, a partner at
accounting firm Anchin Block & Anchin.
Say that your investments earn $10, and you
get charged $2 in fees. “If they pay you the
whole amount, and you pay an advisory fee
[separately], that fee is taxable,” Gevertzman
says. But commissions charged as you trade,
and deducted from the money you net, don’t
get taxed.
Get Educated One group that will benefit in
a big way from the 2017 changes are parents
and grandparents of school-age kids, thanks
to an expansion of 529 plans. In these state
plans, earnings aren’t taxable, and when
you take money out to pay for such things as
tuition, room, board, and textbooks, there’s
no tax implication either. Though 529s were
originally designed as higher-ed savings ve-
hicles, “in the new tax law, tax-free withdraw-
als are now allowed for private school, from
elementary through high school,” Brown
says. But be aware, gift tax exclusions (now
$15,000 a year) may apply.
PAIN-PROOF
YOUR PORTFOLIO—
FOR NE X T TIME
TA X DAY HAS COME AND GONE, along with appreciable
amounts of your money. Given the huge changes
enacted under the Tax Cuts and Jobs Act of 2017, tax pros were
still trying to figure out what worked (and what didn’t) right up
to the filing deadline. To decode the code, we talked to top tax
experts to find strategies you can implement now—that just might
pay big dividends next April.
INVEST
THE TA X MAN COMETH
Individual tax receipts have been steadily rising since 2010.
Recent changes to the tax code, however, may provide investors
with opportunities to limit their liabilities.
