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.