Investment Review

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If you already have your investment account with Northrop Wealth Development, LLC, you can rest assured that this benefit is already being provided to you.

If your investment is held at another firm, either consider transferring your investment to our affiliate or allow us to assist you in reviewing your investment ideas with you and your advisor.  Many advisors are not CPA's and are not aware of the tax implications with certain types of investments.  We can make recommendations to maximize your after-tax return and show you the impact that taxes have on your investments.  While it is important to note that taxes should not drive your investment strategy, understanding how taxes affect your earnings will help you maximize your return and minimize taxes owed.

Consider the following as a brief example:

  • Dividends and long-term capital gains provide for a favored tax status.  Consider putting more dollars in dividend paying investments and keep holding periods in mind before selling investments so you can take advantage of long-term capital gains.
  • You can only deduct up to $3,000 of capital losses in excess of capital gains.  Rebalancing your winners and losers will help you to maximize this deduction and limit carryforwards.
  • In some cases, investments that create high taxable gains can be given to family members who are able to take advantage of lower tax brackets.  The "kiddie tax" is a limitation but proper structuring still allows for an added benefit.
  • Municipal bonds are federally tax-free investments which solve the problem of maximizing after-tax returns.  However, since these bonds are federally tax-free, they will generally pay a lower amount of interest.  It is important to calculate taxable bond after-tax returns and compare them with the federally tax-free municipal bond returns to see which will provide you with a better investment strategy.
  • Another important tax consideration with investing is determining which investments to keep in your tax-deferred accounts, such as a 401(k) or traditional IRA, and which to keep in a taxable account.