SWFG: Capital Gains & Taxes
At Stribling~Whalen Financial Group, we take tax efficiency very seriously while investing for clients. There is a lot to balance as we seek to produce solid returns while being thoughtful about your tax bill. Below are some important things we think of when managing money:
- “Don’t let the tax tail wage the dog.” This saying is used in investing that suggests we shouldn’t let tax management have a disproportionate impact on the investments we pick and our decisions on when to sell them. It’s a delicate balance. We do our best to hold an effective basket of investments for you, but that can mean that we occasionally harvest gains or sell investments that fall out of favor. This can result in a significant tax hit, but we sell anyway when we feel the good outweighs the bad in deciding to reduce that investment.
- Everyone’s unique situation is factored when making a decision. Everyone is different, and we consider your overall tax picture when buying and selling investments.
- Communication is important. No one likes surprises, so we make an effort to make you aware of the years when taxable capital gains are going to be higher than normal so you can make payments and take action accordingly.
- When we can, we use ETFs in your accounts. ETFs can be more tax efficient than mutual funds.
- In down years like last year, we look for opportunities to do something called “tax loss harvesting.” There can actually be a tax benefit when we sell certain investments when they are down or make exchanges into other like funds or investments.
- Finally, we take great care in how we advise money to be withdrawn from accounts. We seek to achieve tax diversification by taking from accounts that will be most tax efficient now, in the future and often for the next generation.
If you have any questions on how we consider taxes when making investment decisions, please let us know!
Disclosure: Any opinions are those of Stribling~Whalen Financial Group and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of the strategy selected. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
