Tax Aware Investing

As part of knowing our clients, we ask for income tax information so we can manage your accounts more effectively. On a basic level, a tax-sheltered retirement plan account can be managed much differently than a taxable account: we can trade more frequently without concerns about generating capital gains.

Knowing the tax effects of different types of investments also allows us to generate better after-tax returns in your account. For example, exchange-traded funds match gains and losses within their portfolios which can reduce the capital gains generated to investors. Some mutual fund managers consider the tax effects of their holdings while others do not. We take this into account when screening funds for our clients. Also, certain dividends paid out by funds are taxable at lower rates than other dividends. Some funds pay out principal which is not taxable income but affects the tax basis of your investment.

Clients have a range of tax concerns. For some high-income investors, the purchase of municipal bonds may be advantageous. We can analyze whether non-Maine municipal bonds may be more tax-effective than Maine municipal bonds. Similarly, trust accounts and non-profits are separate taxpayers with separate tax rates and different treatment of income. We can manage a trust or 501(c)(3) account with these variables in mind.

Taxes directly affect your ultimate returns. We seek total return with eye towards deferring and reducing your taxes when prudent.