The Biggest Mistakes First Time Investors Make

6 Tips for Tax-Efficient Investing in 2017

04 08 2017

6 Tips for Tax-Efficient Investing in 2017

Benjamin Franklin has been credited with coining the witticism that there are only two certainties in life: death and taxes. While there’s not much one can do about the former, savvy investors and their trusted advisors have developed a plethora of ways to help everyone from first time investors to the savviest investment types be more efficient about how taxes are earned, which ultimately impacts how taxes are paid.

For those in and out of real estate investing, tax day is right around the corner. Following is a roundup of some tax filing tips and strategies for 2017 and beyond. Please make sure you consult a financial advisor to help determine which, if any, of these strategies may be right for your circumstances.

  1. Strategize with Taxes in Mind
  2. According to the Journal of Accountancy, one of the primary ways in which to lessen one’s tax burden is to implement a tax-efficient investment strategy in which one has both taxable and tax-advantaged accounts. Tax-efficient investment strategies like index funds and other passive investments can be placed in a taxable account, while tax-inefficient strategies like real estate investment trusts or funds with high turnover rates find their way into tax-advantaged accounts.

  3. Don’t Ignore Your 401(k)
  4. An often overlooked, but hugely important source of tax-efficient investing, can be found in the 401(k) plan that you may have through your employer. With a 401(k), your adjusted gross income is lowered, which lowers the amount of income you pay in federal taxes. The second benefit is that many companies match your contribution by a certain percentage based either on what you earn, or by an across-the board company match.

  5. Balance Your Portfolio
  6. Rebalancing your portfolio to maintain your strategic asset allocation is another means of mitigating tax drag on your taxable accounts. By diversifying your retirement portfolio with variable annuities, one may benefit from tax-deferred growth potential, interest income, and increased retirement savings.

  7. Think Charitably
  8. Tax filers can garner considerable tax savings for making charitable donations helping to make a robust difference in the size of one’s refund. All types of donations can help

  9. Reexamine Your W-4
  10. Approximately 73% of Americans receive annual tax refunds averaging $2,800, says Betterment. While it certainly feels good to get that much money back at the end of the tax year, essentially what it means is that you overpaid your taxes every month by $233. Consider refiling your for W-4 with your employer, and discuss your decisions with a financial advisor.

  11. Know Your Write-Offs

Always be on the lookout for tax write-offs you may not yet know about. For example, did you know that if you meet certain requirements you may be able to deduct your vehicle registration fees? How about if you and your spouse were 65 years of age or older at tax filing time, you could be eligible for a higher standard deduction? There’s a lot out there, so make sure you’re familiar with which write-offs apply to your situation, and check with your financial planner to ensure you’re on a good track.

Tax Filing Tips in 2017

The best time to think about tax planning is all the time – it’s always wise to speak with your financial planner and other professionals, and to be on the lookout for ways to minimize and manage taxes. Tax time is unavoidable, but with smart planning, it doesn’t have to be dreaded. As always, make sure you discuss your potential deductions with your financial planner and your accountant.



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