Tax efficient investment strategies

Investing can provide additional income, but it’s essential to understand capital gains and tax breaks to be more efficient.

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How are investments taxed?

Investments are essential to building and protecting your assets. The additional income you earn can also affect the amount you pay in taxes. To minimize this impact, you’ll have to develop a strategy that considers both cash from interest and sales, i.e., “investment gains,” and the relevant taxes.

Before you begin, however, you should take a moment to review the following:

  • Capital gains and taxes
    Capital gains are profits earned from the sale of an asset such as a stock, a bond, or a house. The taxes levied on capital gains vary, depending on how long you hold the asset prior to selling, with “short-term” capital gains applying to assets held for less than a year and “long-term” capital gains applying to assets held for a year or more. Typically, long-term capital gains have a lower rate (the government does this to encourage long-term investment), so it's often in your best interest to carefully choose your investments and hold on to them
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  • Investment tax breaks
    Certain financial vehicles and retirement plans provide valuable tax advantages: Tax-deferred growth allows you to accumulate cash without paying taxes on the value until you make a withdrawal.1 In addition, qualified plans, such as 401(k)s and traditional IRAs, enable you to deduct the money you contribute from your income, which effectively lowers your taxable income. These contributions can be deducted up to certain limits.

  • Tax regulations
    You’ll also want to review your state, local, and federal tax codes before you formulate or alter your strategy. Regulations can and often do vary from year to year, so it’s essential to keep yourself informed. Consider arranging a call to your legal or tax advisor if you haven’t already.

Want to learn more about investment strategies?

A NYLIFE Securities Registered Representative can help determine what’s right for you. 

1Withdrawals may be subject to regular income taxes and, if made prior to age 59½, may be subject to a 10% IRS penalty.

Investments are offered through NYLIFE Securities LLC (member FINRA/SIPC), a Licensed Insurance Agency and a New York Life company.

This material is for informational purposes only. Neither New York Life nor its agents provide tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.