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A recent E*TRADE StreetWise survey of experienced investors discovered that while many investors claim to be tax conscious, most fail to take advantage of all the available tools that can help them keep the amount of taxes they pay each year on those investments as low as possible.
One of the best ways to limit investment taxes is through tax-advantaged accounts such as such as IRAs, 401(k)s, 403(b)s and Health Savings Accounts (HSAs). Indeed, half of all trading takes place in these accounts — and for younger investors, that number surges to nearly 60%. With that in mind, it shouldn’t be too surprising that the survey found that 45% of all investors believe investing in these tax advantaged accounts is the most effective strategy for limiting taxes they pay on investments each year.
Other Tax Saving Strategies
Of course, there’s more than one way for investors to limit the damage that taxes can do on their investment returns. While the survey found that investing in tax-advantaged accounts was the most popular strategy for effectively limiting taxes paid on investments each year, it was by no means the only one. Here is the complete list, from most to least popular:
- Investing in tax-advantaged accounts, such as 401(k)s, 403(b)s, IRAs, health savings accounts (HSAs) (45%)
- Selling positions that have lost value in order to offset capital gains (18%)
- Holding investments for at least one year to ensure lower taxes on gains (17%)
- Investing in tax-free municipal bonds (10%)
- Investing in tax-advantaged deferred annuities (6%)
- Investing in funds with low turnover (4%)
The good news is, with tax day just around the corner and many people still struggling to get their taxes finished, there are excellent online applications available that can help you manage your taxes and ensure you’re getting the most from your investments — both now and in the future.
For example, E*TRADE offers a number of easy-to-use tools and resources designed to help investors gain the insight necessary to fully understand and manage their taxes as efficiently as possible. In fact, the online broker has firmly established itself as a valuable one-stop knowledge-shop with easy-to-use online libraries such as its personalized Tax Center, which provides an array of tools and resources for E*TRADE customers. There you can find everything from cost basis reporting and tips on managing capital gains and losses, to frequently asked tax questions and other important help.
And, as an added bonus, the online broker also offers its E*TRADE Education Center for tax resources that’s available to investors everywhere — regardless of whether they’re an E*TRADE customer or not. Best of all, you don’t even need to log in!
It’s important to keep in mind that online tax tools and resources like those offered by E*TRADE are available all year long to help you get the most out of your investments. After all, even though April 15th will soon be behind us, the truth is, it’s always right around the corner.
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