It’s time to think about filing taxes.
If your income in 2020 was affected by the COVID-19 pandemic, your tax return will reflect it. However, if your earnings were fairly normal last year, you might look at your tax situation and wonder how you could improve it in 2021. One area to consider may be your investment-related taxes.
For example, are you contributing as much as you can afford to tax-deferred vehicles, such as your traditional IRA and your 401(k) or similar retirement plan? If not, consider ramping up your contributions this year.
And if you can afford to invest outside your retirement accounts, try to follow a buy and hold strategy. By holding investments for years before selling them, you’ll be taxed at the long-term capital gains rate, which may be lower than your personal income tax rate.
Taxes should be a consideration when you invest. However, not all the investments you select, and the moves you make with them, will necessarily be the most tax efficient. Work with your financial and tax professionals for help in making the right choices for your long-term goals.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisors, Brent D. Hoskinson and Linda Drake. Edward Jones, Member SIPC.
Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.