What are Tax-Efficient Investment?

2/4/2021

What are Tax Efficient Investments | Kristian Finfrock | Investment & Tax Planning

a What are Tax-E cient Investments?

by Kristian Finfrock | Feb 2, 2021 | Investment Planning, Kristian Finfrock, Tax Planning, Uncategorized

Taxes are a part of our everyday life. From paying sales taxes to local government and investment taxes, more than likely, you’ve experienced paying them in one form or another. So although investments are a great way to build your income, they can be costly when it comes to how the income is taxed. Many investors seek out tax-e cient investments that prove to be less of a tax burden than other investments to mitigate this.

And most investors know that whether the purpose of the investment is to save for retirement or generate cash ow, one of the sole principles of investing is to minimize taxes.

Tax-E

cient Investments

Municipal Bonds Municipal bonds are a great example of a tax-e cient investment. In most cases, they are exempt from federal taxes and may even be exempt from state and local taxes if they’re https://kristianfinfrock.org/what-are-tax-efficient-investments/

1/3

2/4/2021

What are Tax Efficient Investments | Kristian Finfrock | Investment & Tax Planning

issued in-state. When these bonds are sold prior to maturity, however, they can be subject to market uctuations, and in some cases, can be worth less than their original cost.

Treasury and Series I Savings Bonds Another tax-e cient investment example falls under Treasury and Series I bonds, both of which can be exempt from state and local taxes but are subject to taxes on a federal level.

Series I savings bonds are non-marketable interest bearing bonds that cannot be bought or sold in a secondary market. They hold a xed interest rate and an adjustable in ation rate.

Tax E

cient Investment Accounts

When you’re choosing your investments, it’s important that you select the right accounts for holding those investments. Generally, there are two types of investment accounts: Taxable Accounts Taxable accounts don’t have tax bene ts but o er fewer restrictions and more exibility than tax advantage accounts. A brokerage account, for example, is considered a taxable account. Account-holders can withdraw money from these accounts at any time, for any reason, without having to pay additional taxes or any penalties. It’s also important to remember that if you hold your investments in their account for at least a year or more, you’ll be subject to pay the preferred long-term capital gains tax of 0%, 15%, or 20%, rather than short-term capital gains that are taxed as regular income.

Tax-Advantaged Accounts The other option is tax-advantaged investment accounts. These accounts are typically either tax-deferred or tax-exempt and come in the form of 401(k)s and traditional IRA plans. There are a few tax bene ts that you can receive from holding one of these accounts, such as being able to deduct your contributions and only paying taxes when you start withdrawing money in your retirement–making them tax-deferred.

Securities o ered through Kalos Capital, Inc. and Investment Advisory Services o ered through Kalos Management, Inc., both at 11525 Park Woods Circle, Alpharetta, GA 30005, (678) 3561100. Retirement Income Strategies is not an a liate or subsidiary of Kalos Capital, Inc. or Kalos Management, Inc.

FOLLOW KRISTIAN ON SOCIAL MEDIA About.me Angel List Behance https://kristianfinfrock.org/what-are-tax-efficient-investments/

2/3