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Most Americans don’t take the time to understand the role taxes play in achieving, or falling short of, their long-term financial goals. If left unchecked, taxes can reduce returns each year and over time take a big bite out of an investors wealth. An uncertain tax structure can cause significant harm. The fact is, taxes on investment income and capital gains affect every investor—not just the ultra-wealthy. It’s especially challenging for retirees who mistakenly assumed that their tax rate would be lower in retirement. That may prove not to be true, as a constantly evolving tax code may mean greater tax liability in the future for all investors.
Most investors are aware of terms like asset allocation, diversification and portfolio rebalancing, yet the slightest shift in portfolio composition—a change in allocation or change of management, or even unplanned withdrawals—can generate harmful side effects – taxes.
In times like these, every investor needs to examine and possibly rethink their investment tax management. The best way to address this issue is to develop a Tax-efficient Tax-Management Strategy. These strategies are not just for the ultra-wealthy.
Gains are a good thing; but while focusing solely on generating the highest investment returns, many fail to consider the factors that contribute to — or detract from what they actually earn after taxes.
There are many tax-managed investments tools, and strategies that may help investors keep more of what they earn.
TOOLS AND STRATEGIES TO HELP YOU KEEP MORE OF WHAT YOU MAKE
• Make tax management a year-round undertaking – Keep taxes top of mind. Successful tax management is not seasonal. If you wait until year-end to consider tactics, you’ll never get the most benefit. You should be “tax-management-minded” on your investments year-round and in every market condition.
• Schedule regular investment tax reviews – Given the potential drain on wealth, we believe that tax management should be a cornerstone of every investor’s planning process and planning reviews
• It calls for greater sensitivity to the tax consequences of portfolio implementation by employing effective tax management techniques and strategies throughout the year.
• Capital Allocation Awareness – Think about asset location vs asset allocation. i.e. tax wrapper awareness.
• Wider rebalancing ranges – A wider rebalancing range can help reduce the number of trades made to your portfolio, which may lead to lower realized capital gains and corresponding taxes.
• Tax-lot accounting – A method of accounting for a securities portfolio in which the investor tracks the purchase, sale price and cost basis of each security.
• Loss harvesting: Allows the investor holding a stock at a loss to sell all or part of it to realize the loss and create an “asset” that may help offset some future gain.
• Gain-loss offset: Involves selling securities at a loss that have dropped in price, to help offset gains from selling securities that have increased in price.
These are some of the tools that fall within the category of “tax-aware” trading. Each investor needs to assess their individual circumstances to determine what tools may be best for them to utilize.
We offer a complimentary initial consultation.
Contact us at 813-793-7048 or email at dominick@northstarwealthadvisor.com.
Information contained in this article is not intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.
Securities and Advisory Services are offered through Calton & Associates, Inc. Member of FINRA/SIPC. North Star Wealth Advisors and Calton & Associates, Inc. are separate entities.
Dominick Calderazzo Registered Financial Consultant®
Dominick entered the financial services industry in 1994 and joined Calton & Associates, Inc. as an independent advisor in 1995. Dominick has attained the
following professional designations: Registered Financial Consultant® (RFC®). Accredited Investment Fiduciary® (AIF®).
He is a Lifework Leadership Tampa Bay Alumni, class of 2012. He holds a General Securities Principal (series 24 license) and also a Registered Investment Advisor Representative (series 66 license). He has served as the Advisory Services Principal and as an investment committee member for Calton & Associates, Inc. until he opened the 98th branch office for Calton in November of 2015. His office operates under the name of North Star Wealth Advisors, Inc. North Star Wealth Advisors, Inc and Calton & Associates, Inc. are separate entities.
He also maintains a securities Series 7, Series 63 licenses, as well as a life, health, and variable annuity insurance license in the State of Florida
Joshua G. Hanby Registered Advisor
Joshua is a graduate of Florida State University where he received a Bachelor of Science in Finance and Real Estate.
Joshua entered the financial services industry in 2001 and joined Calton & Associates, Inc. a Tampa
Florida based broker dealer and investment advisory firm, as a Registered Representative in the same year.
Joshua holds a General Securities Principal (Series 24 license) and also a Registered Investment Advisor Representative (Series 66). He also holds a Series 7 and Series 63 license, as well as Life, Health, and Variable Annuity insurance license in the state of Florida.
North Star Wealth Advisor
13902 N. Dale Mabry Hwy Suite 214
Tampa, FL 33618
813-793-7048
www.northstarwealthadvisor.com