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InvestorGuide University > Subject: Taxes > Topic: Tax Strategies > Strategies to Minimize Taxes: Tax Efficient Asset Allocation
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Strategies to Minimize Taxes: Tax Efficient Asset Allocation


by Tim Bock   (Write for us!)
(Click on the links within the article to get definition of that word)
Some general advantages with owning taxable bonds in a qualified account over holding municipal bonds in a taxable account are as follows: During the non-IRA withdrawal stage the taxable bonds will generally produce higher pre-tax returns. During the withdrawal phase of IRA assets, municipals may provide a slight after-tax advantage, but probably no more than .1% to .5% annually.

Equities Placement

Accumulation Phase
Taxable Account
98%+ tax efficient return (estimate)

Tax Deferred
100% tax efficient return

Withdrawal Phase
Taxable Account
  • Gain is taxed at maximum 15% federal and your state rate
  • May select tax lots - capital is not taxed
  • Tax-loss harvesting is available
  • Step up on basis at death
Tax Deferred
  • Withdrawal taxed at maximum marginal state/federal rates
  • No tax lot selection
  • No tax-loss harvesting
  • No step-up at death
Conclusion
Astute asset class placement between accounts, utilizing tax loss harvesting, and employing tax-managed index funds can provide the optimal benefits of tax-efficiency with maximum effective diversification. The rigorous application of these powerful tax-minimization techniques can help an investor retain more of their hard-earned wealth and be able to have more spendable income.


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 Strategies to Minimize Taxes: Variable Annuities >
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 Strategies to Minimize Taxes: Municipal Bonds >
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