5 Tax Optimization Tricks Every Investor Needs To Know
Written by
Chris Adam
Edited by
Zuri Anderson
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When it comes to tax planning, especially if you’re an investor, awareness can make a huge difference between success and failure.
“Paying attention to timing, account types and how different decisions interact can make a meaningful difference over time, even if no single move feels dramatic on its own,” said Taylor Kovar, certified financial planner (CFP), CEO of 11 Financial.
Here’s a look at five expert-backed tax optimization tricks for investors to consider now that the new year is here.
Maximize Tax-Advantaged Accounts
“Leveraging the right accounts is foundational to tax optimization, helping bring order to your financial life,” said Christopher Stroup, founder and president of Silicon Beach Financial.
He suggested prioritizing employer plans like 401(k) plans and using Roth IRAs and triple-advantage health savings accounts (HSAs).
“Remember that health savings accounts don’t have to be limited to getting your current medical expenses,” said Melanie Musson, a finance expert with Quote.com. “If you have an eligible high-deductible health plan, you should be maxing out your HSA contributions. Not only are the contributions pre-tax, but the withdrawals are not taxed when used for medical expenses.”
Use Strategic Asset Location
According to Stroup, where you hold assets is as important as what you hold. He said this objective strategy helps you avoid emotionally driven decisions about asset placement. He noted income-producers in tax-deferred accounts and growth assets in taxable accounts may be options to consider.
Implement Tax-Loss Harvesting
Several of the financial experts who talked to GOBankingRates mentioned tax-loss harvesting as a powerful and proactive strategy to manage a portfolio’s tax efficiency year-round.
“Tax loss harvesting is a strategy that involves selling investments at a loss to offset taxes owed on capital gains from investments with realized profits that you will need to recognize on your tax return,” said Marguerita Cheng, certified financial planner (CFP) and CEO of Blue Ocean Global Wealth.
Optimize Charitable Giving
“If you are one to give generously, then charitable giving can provide a huge impact on your taxes. These can offset income and provide a huge tax benefit to the donor,” according to Brandon Gregg, CFP and advisor with BBK Wealth Management.
Consider Home Options
“The sale of a home might not be taxed,” said Kevin Estes, CFP and founder of Scaled Finance. “Up to $500,000 for married couples and $250,000 for single filers may be excluded.”
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