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Tax season is upon us. Don’t leave your money on the table for the IRS. Instead, let us help make sure your investment portfolios are as tax-efficient as possible, to ensure you’re not losing out on more of your hard-earned return dollars than necessary.
Here are our 5 simple strategies for minimizing taxes in your investment portfolio:
- Hold On to Your Investments
Hold on to your investments for more than one year, if possible. If you sell an investment after holding for more than 12 months, and it is worth more than you paid for it, you are taxed at long-term capital gains tax rates.
- Utilize Tax-Sheltered Accounts
Utilize tax-sheltered accounts to hold investments, such as IRA’s, Roth IRA’s, 401(k), and 403(b) plans whenever possible.
- Utilize Index Funds
If you invest in mutual funds, utilize index funds. Index funds tend to minimize taxes compared to actively-managed mutual funds. Sometimes (like 2018) the value of your actively-managed stock mutual fund will be lower at the end of the year compared to the beginning, but they will issue a tax liability for capital gains!
- Purchase Individual Securities to Match Risk Tolerance
If your portfolio is large enough, purchase individual securities to match your risk tolerance. By owning shares directly in a company, you are able to control the capital gain/loss opportunities.
- Invest in Municipal Bonds for Fixed Income Allocation.
Consider investing in municipal bonds for your fixed income allocation. Municipal bonds provide tax advantages in comparison to corporate bond holdings.
Have more questions or would like to speak to a banker?
Contact Gary L. Popkes, CFP® | Senior Vice President – Wealth Management & Trust Services or Brad Lupkes | Wealth Advisor here at Frontier Bank .
trust@frontierbk.com
Phone: 605-332-3832 Downtown Sioux Falls | 712-472-2538 Rock Rapids
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