Investments and Taxes

Investing is very important if you want to put your money to work for you. With that said, though, if you’re not careful about how you invest, you could end up paying a lot of money in taxes that are related to your investments. The good news, though, is that you don’t have to. Believe it or not, there are many ways to lower your investment-related taxes, or, in some cases, even to get rid of them altogether!

Non-Retirement Tax-Efficient Funds

One of the smartest and simplest ways to get taxed less is by choosing your mutual funds responsibly and carefully.

To avoid paying hefty capital gains taxes and dividend distribution taxes, look into index funds or tax-managed funds.

If you’re not sure which type of fund will be the most beneficial for you and your situation, remember that you don’t have to go it alone! You can always hire a financial adviser to help you choose the best possible option.

Take Advantage of Your Tax Bracket

If you are someone who falls into a lower tax bracket, classified by the IRS as 15% or lower, you may be able to benefit from your bracket status.

People in this category often fall into the zero percent capital gains tax bracket, which means that they do not have to pay taxes on any realized capital gains.

If this applies to you- and, again, a financial adviser can help you to determine if it does or not- you basically have a “get out of jail free card” when it comes to taxes.

Delay Social Security

Finally, you may want to think about “holding out” a bit longer to start receiving social security because it’s very likely that your benefits will be taxed.

Again, situations do vary from person to person, but, in many cases, IRA withdrawals are a smarter early-retirement choice than social security.

As you can see, you do have some options for lowering your investment-related taxes or perhaps even eliminating them. These are really just a few ways in which you can do so. To discover more, speak with a financial professional.

Friday, May 5, 2017