How to invest tax efficiently
Find ways to help create a strategy that defers, manages, and reduces taxes
Tax-loss harvesting is when you sell an investment like a stock or bond for a loss and use that loss to offset realized capital gains from other securities or other income. Tax-loss harvesting can be a useful way to help you keep more of what you earn. Each taxpayer is allowed to use capital losses to offset capital gains, and can use any remaining losses to offset up to $3,000 of ordinary income each year. Any losses not used in a given tax year can be carried forward and used in future years. So selling losing investments and using those losses to offset gains can be used to reduce your tax bill.
Most people experiences investment losses from time to time, and if handled properly, the strategy can potentially improve overall after-tax returns. The challenge is that a systematic tax-loss harvesting strategy requires disciplined trading, diligent investment tracking, and detailed tax accounting. It’s important to consult a financial advisor and CPA because you need to be aware of the wash-sale rule which could get you in trouble with the IRS if not considered.
Tax Deferral Investing is a way to take after tax money and invest it without having to pay short term or long term capital gains tax on it till you decide to withdrawal from this type of account. If you don’t qualify for an IRA or don’t have the opportunity of creating a 401k, than this is a viable option.
Tax Free Income planning can help offset future taxes in the case legislation starts to raise tax rates while in your retirement years. There are a few instruments for tax free income planning and the key to success is starting early enough so there is enough time for the investment to grow through Roth IRA contributions, Roth IRA conversions or maximized life insurance contracts.