Tax Planning

What is Tax Planning?

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 investments.

Selecting Investments from a Tax Perspective

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.

The 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.

Additionally, when 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.

The Ziegler Advantage

At 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.

B.C. Ziegler and Company does not provide tax advice. Please consult with your tax advisor. Our planning services are not financial planning (unless they are specifically called investment consulting services). They do not create an investment advisory or a fiduciary relationship (including under ERISA) between you and B.C. Ziegler and Company. B.C. Ziegler and Company will prepare a financial plan at your specific request through NaviPlan.

Investment consulting services are offered at B.C. Ziegler and Company only through investment advisory programs and are not available through traditional brokerage accounts and products. Please speak with a Ziegler Wealth Management financial advisor to further discuss the differences between brokerage and advisory products offered by B.C. Ziegler and Company.