How to be Tax Efficient with Your Investments

Updated : Oct 22, 2019 in Articles

How to be Tax Efficient with Your Investments


Tax efficient investing involves strategies
to help reduce the impact of taxes. Investments have three tax flavors: taxable, tax-deferred
and tax-exempt. Taxable requires gains to be paid as they are earned each year. These
include investments like CDs and money market funds. Tax-deferred gains remain sheltered
from taxes until withdrawn for retirement at age 59 ½ like 401(k)s or IRAs. Tax-exempt
interest is not taxable either by federal or state taxes. To determine the tax effect of your investments,
you must know which tax bracket you’re in and if capital gains rules apply. The highest
investment income minus the lowest taxes due is your investment goal. So focus on placing
fully taxable investments in tax-deferred accounts. Don’t make the common mistake of putting
investments that have tax benefits into an IRA. You will lose those tax benefits since
all distributions from traditional IRAs are 100% taxable. Let us help you make tax efficient investments
in your portfolio. Give us a call today.

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