Want to Know How Investment Losses Can Be Leveraged To Help You Now AND In The Future?

Looking for ways to accumulate more wealth? One of the ways I help clients accrue more over the long-term is by applying tax-smart strategies that can help you keep more of what you’ve earned. By reducing the tax liabilities for your portfolio, you’ll potentially have more money to invest during your working years and more income to enjoy during retirement.  

The Impact of Mutual Funds on Capital Gains

Mutual funds are popular with many investors due to their inherent diversification, professional management and potential for lower risk than stocks. But there can be some downsides too — especially when it comes to capital gains tax.

When you own stocks, you can decide the best time to sell based on their value and your current tax situation. With mutual funds, the fund manager chooses which assets to sell and then passes on those capital gains to you. In the worst-case scenario, they may choose to sell assets with significant gains shortly after you bought the fund. In this situation, you wouldn’t get the benefit of those gains, but you’d still be on the hook for the capital gains tax that goes with their distribution.¹

Why Your Taxes Might Have Been Significantly Higher for 2021

Investors have been enjoying a long-term bull market, which has pushed mutual fund earnings higher. Although that’s a great problem to have, stronger gains equate to more potential taxes when fund managers sell assets to buy new positions or fund client redemptions.

One Strategy for Tax Reduction? Tax-Loss Harvesting

Tax-loss harvesting refers to identifying and selling an asset that has not performed as well and then reinvesting in other assets that might help strengthen your portfolio. The difference between the amount you initially paid for the asset and the sell price is then applied against future capital gains to help lower your tax bill. Up to $3,000 can be applied annually to ordinary income with any additional amount carried over to subsequent years.

Although mutual funds only pay capital gains distributions in the fourth quarter, you shouldn’t wait until then to start accruing “tax assets”. Tax-loss harvesting can be applied throughout the year and one of the best times to take action is when the market is more volatile.

One of Many Tax-Saving Strategies

Of course, tax-loss harvesting is just one way I can help you reduce your annual tax bill without impacting your portfolio performance. Wealth management through a tax-focused lens can be applied across most of the financial decisions you’ll make in your lifetime — including investing, retirement spending, social security planning and transferring wealth.

Why miss out on the potential for more significant gains? Contact me today for a comprehensive review of your financial situation including opportunities to potentially capitalize on tax solutions for all your financial planning needs.

^{1https://www.kiplinger.com/investing/mutual-funds/603720/mutual-fund-capital-gains-could-be-a-handful}

^{Avantax Wealth Management® is the holding company for the group of companies providing financial services under the Avantax® name. Securities offered through Avantax Investment Services℠ , Member FINRA, SIPC. Investment advisory services offered through Avantax Advisory Services℠  and Avantax Planning Partners℠ . Insurance services offered through licensed agents of Avantax Insurance Agency℠ , Avantax Insurance Services℠ , and Avantax Planning Partners. 3200 Olympus Blvd., Suite 100, Dallas, TX 75019, 972-870-6000.}