Why this is important now
- Capital gains distributions are rising: In a strong or volatile market, mutual funds and ETFs often pass on taxable gains to investors. Even if you didn’t sell shares, you may still owe taxes when funds distribute gains. Many investors are caught off guard when they get their 1099 in February and see a larger-than-expected tax bill.
- Interest income is overlooked: Conservative investments like CDs, Treasury bills, or bond funds can generate steady income, but those earnings are taxed at higher ordinary income rates. For clients holding large fixed-income positions in taxable accounts, this can mean paying more tax than necessary.
Smart planning strategies
- Harvest strategically: Tax-loss harvesting allows you to sell underperforming investments to offset taxable gains. Done correctly, this can reduce your tax bill while keeping your portfolio balanced.
- Coordinate with income years: Gains and losses should be planned in the context of your income. For example, realizing gains in a year with lower income may keep you in a favorable tax bracket, while deferring them in a high-income year may help avoid surcharges like the Net Investment Income Tax.
- Use tax-advantaged accounts: Maximizing contributions to retirement accounts (IRAs, 401(k)s) shelters growth and income from current taxation. Placing interest-heavy investments in these accounts can help reduce annual tax drag.
Tax efficiency isn’t about avoiding gains — it’s about aligning them with your bigger financial picture. At wealthnest®, we work with clients to build portfolios that grow while keeping tax surprises under control.
Rising capital gains distributions and overlooked interest income don’t have to catch you off guard. With the right planning, you can align your investments with your tax picture and keep more of what you earn.
👉 Schedule a tax-efficient portfolio review with wealthnest® today and take control of your next tax season.