Well, it is April again and we all know what that means. Time for the taxman to take his share of your money. We all hate paying taxes but there are some very basic strategies that you can employ to help lower the amount of taxes that you pay from your investment portfolio.
Here are 5 tips to help you manage your investments and lower your taxes
- If you are inclined to buy and sell stocks for profit, I recommend doing so in your retirement account. This is the best option for short term trading activity because the gains will grow tax deferred.
- For your traditional investment account you want to decrease the amount of turnover. If you realize gains on investments that you hold for under a year you will have to pay short term capital taxes on those gains, usually in the neighborhood of thirty five percent if you are in the highest tax band. The best advice is to hold on to your winning stocks for over one year, then you can claim long term capital gains and only pay a rate of fifteen percent.
- The IRS allows us to offset your capital gains with losses and in addition you can write off up to 3k in over losses.
- Your IRA account should be utilized if you are looking to play in the corporate, t-bond or REIT game. The advantage here is that you will be taxed the same on interest income as you are on earned income.
- Drop the high fees – Management fees can eat away at your profits. In your non-ira accounts you should invest in index funds instead of mutual funds. Index funds make very few changes and therefore you will not be taxed to death like you would be with all the changes occurring in a managed mutual fund.
These five simple tips will help alleviate the tax pain and put more money in your pocket instead of the governments.
