Tax planning usually involves strategies to minimize your income tax
liability by, for instance, deferring income, maximizing deductions and
deductible expenses for a particular year, and selecting tax-advantaged
Investment tax planning focuses on the income tax implications of your
investment selections. You should understand how the different returns
of the investments you are considering are taxed before finalizing your
asset allocation decisions. For example, corporate and most government
bonds generate ordinary income taxed at your marginal (top) tax
bracket. However, municipal bonds are generally tax-exempt. The stocks
of many large, established companies like banks and utilities pay
regular dividends. Dividends are eligible for a reduced rate of tax
from 2006 – 2010 based upon current legislation. Otherwise dividends
are taxed as ordinary income. Many growth companies, such as technology
firms pay little or no dividends, as they reinvest all of their
earnings. Most stock is owned in the hope that it will increase in
value over time. This increase in value is called a capital gain, and
is most often taxed at a lower rate.
timing of when you receive income is also an important consideration.
Taxable bond income and dividends are taxed in the year you receive the
income. The increase in the value of a stock (capital gain) is
generally taxed when the stock is sold. Either way, timing should be
taken into consideration if you decide to make a major shift in your
investments that requires the sale of a lot of highly appreciated
assets. It is also important to know that stocks you hold for one year
or less will not receive favorable tax treatment, and their gains are
taxed as ordinary income.
The investment strategies of mutual
funds should also be considered from a tax perspective. Some funds
adopt a buy-and-hold strategy that minimizes the taxes generated. Other
funds regularly buy and sell investments, triggering taxes even if you
do not make any changes to your investments.
you are saving for retirement, you may choose to invest in
tax-deductible and tax-deferred vehicles such as your 401(k) through
your employer or an IRA or Roth IRA.
The process of selecting
investments should not be based solely on tax implications. Generally,
if your tax objective is to select tax-favorable investments, it should
be consistent with your return rate expectation and risk tolerance,
overall goals and time horizon.
Ziegler, we bring expert capabilities in the underwriting of bonds in
the industries of healthcare, senior living, schools, faith-based
organizations and alternative energy. Through your Ziegler financial
advisor, you have access – sometimes exclusive – to tax-advantaged
fixed income products for your portfolio. Many of the bonds
underwritten by Ziegler are exempt from both federal income taxes and
income taxes within the state of issuance.
As part of your tailored financial plan,
your financial advisor will assess your portfolio to determine if you
could benefit from tax-advantaged investing, and recommend a specific
strategy to help you meet your goals.
This site has been published in the United States for residents of the United States. The foregoing has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. Securities, products and services offered through B.C. Ziegler and Company Member FINRA and SIPC.