Well, April 15th has come and gone. Following that date, many taxpayers become intimately familiar with Ms. Pelosi’s comment about having to pass Obamacare to find out what’s in it. The increased tax paid by many individuals has caused us to evaluate (again) some tax strategies for investing. We have always maintained that the “tax tail shouldn’t wag the investment dog;” however, tax impact certainly warrants consideration all other things being equal.
Many events can impact taxes in the investment arena. After all, the primary goal of investing is to maximize the after tax return to the portfolio for the risk level chosen. Three general rules apply:
- Avoid taxes if legally possible
- Defer taxes until a future date
- Then if 1 and 2 are not practical, pay the taxes at the lowest rate possible.