Smart Planning
By Jeffrey R. Kosnett, Senior Editor
David Landis, Contributing Editor
From Kiplinger's Personal Finance magazine, March 2008
Advertisement
One final step to cutting the tax bill on your investment portfolio: Be smart about where you hold your investments.
If you have great expectations for a fund manager who tends to rack up big tax bills with a high-turnover strategy, buy the fund but hold it in an IRA or 401(k) account, where taxes won't work against you. Similarly, keep all your taxable bonds in tax-deferred accounts and you won't owe taxes on interest payments for many years. Likewise, it makes no sense to put muni bonds or tax-managed mutual funds in an IRA or 401(k) account.
Taken as a whole, the investing tax breaks Congress has allowed are a mishmash of uncoordinated programs that can be tiresome to navigate. But the extra effort is worth it. Every dollar saved today on taxes is a dollar you'll be able to spend down the road on something worthwhile to you. And that's what investing is all about.
Discuss