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What You Need to Know about Tax Smart Investing

Many people make the mistake of assuming they can’t avoid taxes, and that’s not entirely true. There are many tax strategies that allow you to keep more of your money. Tax conscious investing means making investment decisions with the tax implications in mind. Our financial advisors can help you create investment strategies that allow you to minimize taxes.

Tax planning is important when you’re saving and investing money for your future. While we want to see short- and long-term gains in your portfolio, we also want to make sure you’re not spending an inordinate amount on capital gains taxes as a result. Similarly, we’ll help you create a distribution strategy in retirement that minimizes your tax liability.

<span style="font-weight: 400;" data-mce-style="font-weight: 400;">How Taxes Affect Your Investment Planning</span>

How Taxes Affect Your Investment Planning

Tax laws and loopholes are always an important consideration with investment management. While we help you identify assets that perform well, we also pay close attention to how taxes affect your net earnings. After all, that’s the most important number. When you retire, we’ll also help you manage your distributions with taxes in mind.

What Are Examples of Tax Smart Investing Strategies?

When our investment advisors work with you, we’ll create a comprehensive tax planning strategy to reduce your tax liability. Here are some examples of what this may look like for you.

  • Tax-Loss Harvesting: If your assets aren’t performing, we may decide to sell them at a loss to offset capital gains tax from other assets. While there’s a limit on capital gains losses, you can carry the balance forward into future tax years.

  • Manage Capital Gains: There are different ways to reduce capital gains taxes, including tax-loss harvesting and investing through tax-deferred accounts. Our job includes managing your gains in a tax-favorable way.

  • Manage Distributions: When you receive distributions from your retirement account, you may need to pay income taxes. By managing and timing your retirement income distributions, we can plan for and reduce your tax burden as much as possible.

  • Invest in Municipal Bonds: Interest received on municipal bonds is exempt from federal income tax. They also provide stable, regular, and passive income, which is why they may be a great addition to your portfolio. 

  • Transition Management: The transition from your paycheck to living off your retirement savings isn’t going to be easy. We can help you plan your taxes, so you’re not hit with a big bill come April. Tax planning may also help you avoid slipping into a higher tax bracket.

  • Tax Smart Withdrawals: In retirement, you’ll have a choice of which accounts to withdraw from. You can use Roth accounts to fund some of your income needs tax free. We’ll also help you create a distribution plan to ensure you can cover your living expenses without outliving your nest egg. 

Since taxes make up much of your expenses, it’s important to manage them. There are many options to reduce your tax burden legally when you’re investing for your future or withdrawing money in retirement.

FAQs about Tax Smart Investing

What Can I Invest in to Reduce Taxes?

There are many options to reduce your taxes, including investing inside of a tax-deferred account or using municipal bonds to receive tax-free interest. We can help you create the most effective tax planning strategies for your financial situation. 

How Can I Reinvest Money to Avoid Taxes?

If you keep your investments in a tax-deferred account, you don’t have to pay taxes until it’s time to take distributions in retirement. You can also use other strategies to reduce your burden, such as tax-loss harvesting. For specific information about your situation, please call us.

How Do High-Income Earners Reduce Taxes?

High-income earners take advantage of the IRS rules, such as using capital gains losses to reduce capital gains taxes, investing in municipal bonds for tax-free income, and contributing to a tax-deferred investment account. We’re here to create a customized tax strategy for you.

Let’s Create a Tax Strategy for Your Investment Planning

We specialize in employing efficient tax strategies to reduce your taxable income, helping you keep more of your hard-earned money. With investment management, it’s not just how much your assets earn, but also how much you get to keep of those earnings. Call Dannah Investment Group today to discuss your tax conscious investing needs.

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