Taxes can take a big bite out of your investment returns. If you want to maximize your returns and keep more of your money, tax-efficient investing is a must. Below are some examples of tax efficiency when it comes to investing. Our group will work with you and your CPA to help make your investment strategy as tax efficient as possible.
- Managing capital gains - minimize short term capital gains where possible. If an investment is held longer than 12 months it is considered a long-term capital gain, which is often taxed at a lower rate.
- Tax-loss harvesting - The selling of securities at a loss with the intention of using these losses to offset current and future capital gains
- Choose tax-efficient accounts for your assets - Retirement accounts, 529s & Health Savings accounts can help minimize taxes with tax deferral. Assets that are not tax efficient are typically better off held in a tax deferred account.
- Identify tax efficient assets - Municipal bonds generally are exempt from federal taxes. Individual Stocks and ETFs tend to be more efficient than Mutual funds that can distribute capital gains. Tax efficient assets should be considered for taxable accounts.
- Charitable Gifts - Gifting highly appreciated securities instead of cash or securities at a loss vs selling them and paying the capital gains. Also, Charitable Distribution (QCD) rules allow taxpayers to make IRA distributions to a qualified charity without treating as taxable income.
