Be Tax-Smart: Get Help with Taxable Accounts

Knowing exactly where to put your money can seem close to impossible – there are just so many options, right? And this is why we’re so glad to meet every single one of our new clients – they’ve made a great decision to get professional advice to manage their money, and often in particular, to get help with taxable accounts.

To maximize your profits from your investment portfolio, you need to pay close attention to the tax you’ll pay – tax will likely be one of your biggest expenses.

Over our last couple of posts, we’ve already had a look at different types of taxable accounts and the benefits of using them wisely to stay in control of your taxes. Your investments should be as gainful as possible at the least expense, and probably the biggest obstacle to this is your yearly tax bill.

By spending some time choosing the right accounts for your assets and securities, we can help you to maximise your financial growth and minimise your tax bill.

Asset Location

As your net worth grows, you should aim to end up with many different types of accounts. Whilst this sounds like you’re going to end up with a lot to keep track of, we can help with taxable accounts to make the right decisions for your money and ultimately, for your tax bill.

Tax-efficient investing, otherwise known as asset location, is a strategy you can use to reduce your tax bill. This effectively means deciding which securities should be held in taxable accounts and which in tax-deferred or tax-exempt accounts, then carefully choosing which taxable accounts to use and how.

Let’s look at some of the options that can help you stay in control of your taxes.

Non-Dividend Yielding Stocks

One way to influence your tax bill is to invest in some non-dividend yielding stocks. Unlike stocks that pay dividends, you won’t receive a steady income stream from these, but when their market value appreciates so does your net worth. And some of the companies who don’t pay dividends are true giants of S&P – Amazon, Facebook and Google, for instance.

It’s then up to you when realize any gains or losses – remember when we looked at tax-loss harvesting? Cleverly offset your losses against your gains at the right time and you’re going to see a lower tax bill. Don’t be intimidated by the technicalities – if this sounds like a lot to get your head around, there’s no need to try and go through it alone – we’re always here to help with taxable accounts.

Dividend-Yielding Stocks with Qualified Dividends

Ordinary dividends are classed as income and taxed accordingly; qualified dividends are a bit different. These are taxed at capital gains rates – provided they meet the requirements outlined by the IRS, essentially that they have been listed as qualifying by the IRS and that the holding period has been met – and this means that they’ll be taxed at 0%, 15% or 20%, depending on your tax bracket.

Note these are lower than income tax rates, so that can have a really significant impact on your tax bill. And as with non-dividend stocks, you still control when capital gains and losses are realized. So whilst ordinary dividends can provide you with a more reliable source of income, using qualified dividend accounts can help grow your investment portfolio at a lower tax cost.


Advanced options trading strategies are, well, just that – advanced strategies that require a bit more thought, but we can keep it simple for now. Section 1256 contracts are investments that are assessed at the end of each tax year; if they have increased in value, this will be treated for tax purposes as a capital gain. Likewise, if they have decreased in value, they’ll be assessed as a tax loss.

As with qualified dividends, they’ll have preferential tax treatment and be taxed at a lower rate than income. However, it can get more complicated – if you’ve ‘collared’ a stock (a technique to protect against large losses, at the same time limiting large gains), the collared shares may lose their qualified dividend status.

I know, I know – this is complex stuff. But this is what we love, and we want you to love it too and reap all the rewards. Reach out now for help with taxable accounts – get on track to fine tune your tax bill!

Stock Mutual Funds and Bond Funds

Mutual funds vary hugely – in essence you are teaming up with many other investors and investing in many different securities at the same time. You can keep more of your income if you use a tax-managed mutual fund – these work to minimize income and gains distribution and again, these are taxed as capital gains, so preferential to income tax. They’re particularly useful for higher-income individuals.

Bond funds are particularly good for retirement savings. Viewed purely from an asset location standpoint, bond funds produce consistent income and as such, they’re probably better held in a tax-deferred account.

Let Us Help with Taxable Accounts

Now we’ve had a thorough look at taxable accounts, you’ve seen just a few of the options open to investors. Some of these may seem extra-intimidating as we’ve covered some ground that is generally only reached by really experienced investors.

And not all of these options are right for everybody. We know from experience that every single one of our clients is different; we know you have different objectives, different time horizons for your money and your plans, and different risk tolerance.

When we work with our clients, we look at all these things and use our combined experience and knowledge to create a completely personal investment strategy for you. Let’s arrange your initial appointment, see where we can help with taxable accounts, and make you into a truly tax-efficient investor.

investing for retirement ebook ipad - McClain Lovejoy
investing for retirement ebook ipad - McClain Lovejoy
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