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When it comes to your money, smart investments can make all the difference. However, did you know that your investments play a role in our tax strategy? Tax-efficient investments can not only help you and your business retain more of what you earn today, but also down the line. 

Here are five tax-efficient investment strategies that may benefit businesses and individuals. 

Consider Tax-Loss Harvesting 

Businesses & Individuals 

Tax-loss harvesting involves selling investments that have lost value to offset gains from other investments. It’s a way for both businesses and individuals to potentially reduce taxes owed and put more money elsewhere. 

Explore Tax-Exempt Bonds 

Businesses 

Your state and/or local governments may issue municipal bonds, and the interest they earn is often exempt from federal and state income taxes, making them a relatively safer, tax-advantaged investment. 

Individuals 

The U.S. Treasury issues Series EE and I bonds, and the interest they earn is exempt from state and local income taxes, making them lower-risk, tax-advantaged investments. 

Think About Charitable Giving 

Businesses  

Making philanthropic contributions could potentially reduce your business’s taxable income and provide other tax benefits, as companies can deduct charitable donations of money or property given to qualified organizations from their taxes. 

Individuals 

A donor-advised fund is a charitable investment account made to support charitable organizations. Individuals who open one can donate to philanthropic causes over time while potentially receiving immediate tax benefits. 

Compare Tax-Advantaged Retirement Accounts 

Businesses 

A simplified employee pension (SEP) IRA is a retirement savings plan established by employers that can benefit them and their employees. Self-employed individuals can also open SEP IRAs. Businesses can potentially reduce their tax debt by making tax-deductible contributions on behalf of eligible employees, which also provides a valuable employee benefit. 

Individuals 

Traditional IRAs and Roth IRAs are two types of tax-advantaged individual retirement accounts that allow individuals to grow their retirement savings. The difference is that you won’t pay taxes on the growth of traditional IRAs until you withdraw from them, while Roth IRAs offer tax-free withdrawals in retirement. 

Evaluate Investment Tax Credits 

Businesses 

Investment tax credits (ITCs) are federal tax incentives for particular investments, such as solar panels. Businesses can potentially leverage these credits to lower their taxes owed and contribute to growth in key areas. 

Individuals 

For homeowning individuals, ITCs can apply to solar panels and other energy-efficient home improvements. ITCs can possibly help you reduce your taxes owed while adding value to your personal assets. 

Getting Started on Your Tax-Efficient Investment Strategy 

Every business and individual’s taxes are different, so it’s best to consult a tax advisor who can provide personalized guidance.  

Have questions about developing a tax-efficient investment strategy? We’re ready to help. Contact us to meet with our team of business and individual tax advisory experts.