Tax-smart investing strategies.

To ensure that you keep more of your hard-earned money, here are some tax-smart investing strategies to consider that won’t require a deep dive into the tax code:

1.     Utilize tax-advantaged accounts

Take advantage of tax-advantaged accounts like 401(k)s, IRAs, and HSAs. Contributions to these accounts can reduce your taxable income, allowing your investments to grow tax free or tax-deferred.

2.     Hold investments for the long term

Capital gains from investments held for over a year are typically taxed at a lower rate. Long-term investing can help you minimize the tax impact on your gains.

3.     Tax-efficient funds

Consider investing in tax-efficient funds, such as index funds or exchange-traded funds (ETFs). These investments often generate fewer capital gains distributions, reducing your tax liability.

4.     Tax-loss harvesting

Offset capital gains by selling investments that have declined in value. This strategy can help you reduce your overall tax liability.

5.     Diversify your holdings

Diversification can help you manage risk, but it can also be tax smart. By having a mix of investments, you can choose which assets to sell in a way that minimizes taxes.

6.     Stay informed

Tax laws change, and being aware of these changes can help you make informed investment decisions. Consult a tax professional for answers to any tax-related questions you may have.

7.     Consider some municipal bonds in your portfolio.

Interest income from municipal bonds is often tax free at the federal level and sometimes at the state level. These bonds can be a tax-efficient addition to your portfolio.

8.     Charitable giving

Donating appreciated assets to charity can be a tax-efficient way to support your favorite causes. You may be able to deduct the fair market value of the assets and avoid capital gains taxes.

9.     Estate planning

Have a well-thought-out estate plan to minimize the tax impact on your heirs. Proper estate planning can help preserve your wealth for future generations.

10.  Consider permanent cash value life insurance

Having permanent cash value life insurance, such as a whole life policy, can provide several tax advantages that can help grow and protect what you have acquired.

11.  Consult a professional

When in doubt, seek the guidance of a tax professional or financial professional who can help tailor your investment strategy to your specific financial situation.

 

When investing, it’s important to keep an eye on the tax implications of your decisions. Utilizing both taxable and tax-advantaged accounts allows you to take advantage of the benefits of both. Employing tax-smart strategies that help you maximize your investment returns and keep more of your money in your pocket can sometimes be tricky, however. So don’t hesitate to reach out to one of our financial professionals who can help you make the right decisions for yourself and your family.