Tax-efficient investing is important for two reasons. Not only can these strategies help you keep more money, tax-efficient investing can enable you to keep more of your money invested in the market.
Investment types that are more tax efficient might be better suited for taxable accounts, where an investor must pay both capital gains tax and income tax on interest earned.
4. Stocks that do not pay dividendsWhen you sell a non-dividend-paying stock at a profit, you’ll likely be taxed at the long-term capital gains rate, assuming you’ve held it longer than a year.
Once you understand the tax rules that govern investment accounts, as well as the tax implications, you’ll be able to create a strategy that minimizes taxes on your investment income.