One final step to cutting the tax bill on your investment portfolio: Be smart about where you hold your investments.
If you have great expectations for a fund manager who tends to rack up big tax bills with a high-turnover strategy, buy the fund but hold it in an IRA or 401(k) account, where taxes won't work against you. Similarly, keep all your taxable bonds in tax-deferred accounts and you won't owe taxes on interest payments for many years. Likewise, it makes no sense to put muni bonds or tax-managed mutual funds in an IRA or 401(k) account.
Taken as a whole, the investing tax breaks Congress has allowed are a mishmash of uncoordinated programs that can be tiresome to navigate. But the extra effort is worth it. Every dollar saved today on taxes is a dollar you'll be able to spend down the road on something worthwhile to you. And that's what investing is all about.
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