Everyone is concerned
about paying taxes. In the past, we discussed using Federal and New York
State tax-free municipal bonds to reduce one’s tax liabilities on your
investments. Although on a taxable
equivalent basis because there is greater safety, one has a lower yield. The yields run about 4.2% which is vastly
higher than yields on both money market and CD’s. Nevertheless, with the recent surge in the
stock market, taxpayers may be looking for higher yields. Enter in Tax Harvesting Mutual Funds.
One tax efficient principle
with investment is actually called Tax Harvesting. It is a method where your yield is sheltered
or minimized to taxable dividends and long and short capital gains. Additionally, it uses long term capital losses
to offset short term gains. Such funds
still invest in well known companies such as Apple, Facebook, Exxon Mobil,
Nike, Johnson & Johnson and others.
While there yield is lower than the S & P 500, typically 6.25%, on
an after-tax basis this yield still outperforms the market with a lower risk factor
too.
So consider adding both tax-free
municipals and tax minimized harvesting funds for capital in your business to
proactively attack your tax problem. We
have other tax savings ideas as you gear toward the dreaded tax filing
deadline.