5 Questions to Ask Your Adviser About Taxes
Do you know what asset location is? What about tax loss harvesting? Understanding these concepts might help you minimize your tax hit.

As Ben Franklin once said, "There are only three things certain in life: death, taxes… and an annual scramble by investors to try and save money on taxes before the filing deadline."
Okay, maybe he only said two of those, but as we approach another April 15, investors are once again looking for ways to be as tax efficient as possible with their investments. My advice: You shouldn't only be thinking about taxes for a few months out of every year. Tax efficiency is best achieved when there is an ongoing, concerted effort toward achieving it.
Still, this time of year does provide the perfect time to talk to your financial adviser or advisers about how to approach taxes on investments. Here are five questions you should be asking:
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Am I invested in the most tax-efficient vehicles based on my needs?
The first thing most people look at when choosing an investment product is its overall rate of return. This makes sense as a starting point, but it's not the only relevant factor in investment selection. Taxes can take a considerable chunk out of your gains and leave you with less of a return than expected. There are multiple solutions to minimizing tax implications including tax-managed mutual funds or investing in exchange-traded funds. The important thing is to work with your adviser to find sensible options that don't also minimize returns. Are there better options to minimize taxes while still achieving growth? Go ahead; ask your adviser.
2. Do I have my investments in the most tax-efficient accounts?
Achieving tax efficiency isn't just about the assets you're invested in; it's also about the accounts in which those investments live. One strategy that can minimize taxes is known as "asset location." In this approach, you would hold fewer tax efficient assets in a tax deferred account – such as a 401(k) – and more tax efficient assets in accounts like a Roth IRA, where contributions come from post-tax income, so you don’t pay taxes on it in the future. This helps balance out your tax exposures while leaving your overall asset allocation intact. This is a fairly simple strategy, but it must be executed carefully.
3. How often should I be rebalancing and how do I do it?
A vast majority of investors rebalance on an annual, semi-annual or quarterly basis. There's nothing inherently wrong with this strategy, but it could be costing a considerable amount in taxes and fees. You may want to consider rebalancing more strategically—such as when your portfolio has drifted outside of the acceptable tolerance for the asset classes—and with and eye toward managing taxes. While this would be a nightmare for investors to do on their own, working with an adviser can help achieve lower taxes through more strategic rebalancing. It's not for everyone, but your adviser should be able to tell you if it's a good fit.
4. What are my opportunities for tax loss harvesting?
No one picks winners every time. Especially in down market years, you're likely to have some investments in your portfolio that didn't perform well. While you can't erase these losses, you can take steps to minimize the impact of potential investment losses. One common strategy is to offset taxes on gains and income by harvesting a loss upon selling a security. Maybe you had a good year and didn't have many poor performing assets, but if you did, tax loss harvesting can help minimize the blow.
5. What changes are coming in tax year 2016?
With each new year, comes a new set of updates to tax laws. For example, tax brackets and the amount that can be invested in a company 401(k) or an IRA tend to change annually, although that's not the case this year. While the tax brackets will be shifting, the limits on contributions to 401(k)s and IRAs will remain the same. Having a conversation with your adviser about annual changes will help you develop a comprehensive plan for managing taxes throughout the year. As Ben Franklin actually once said, "Diligence is the mother of good luck."
Phil Simonides, CFP®, is Group Vice President at McAdam, where he oversees the firm's Washington, D.C., metro, New York City metro and Boston offices.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
S&P, Nasdaq Hit New Highs: Stock Market Today
A late-day rally wasn't enough to lift the Dow into the green as its six-session winning streak came to an end.
-
Five Things to Consider Now If You Want to Retire in 2026
To retire with confidence in the year ahead, tackle these essential tasks right now.
-
I'm a Financial Adviser: The OBBB Is a Reminder for Older People to Have a Long-Term Plan
The new tax bill presents a good opportunity for retirees to revisit tax plans, look into doing some Roth conversions and consider plans for long-term care.
-
Moving Abroad? You Might Need a Cross-Border Financial Adviser
If you want to live in another country long term, you could benefit from an expert's guidance. Here's how to find a good qualified adviser to help with residency requirements, documentation, financial laws and tax impacts.
-
Financial Advisers: Here's How to Help Soon-to-Be Married Clients Get Their Financial House in Order
Getting married changes a couple's life in more ways than one, so it's a good idea to discuss financial and legal issues like pre-/postnuptial agreements, estate plans and life insurance.
-
The October 15 Tax Deadline Is Coming: A Tax Attorney Highlights What You Need to Know
If you filed an extension in April, time is running out to get your taxes wrapped up for last year. Here's what you need to know for filing your 2024 taxes and preparing for tax year 2025.
-
Three Strategies to Take Advantage of OBBB Changes, From a Financial Planning Pro
Four of the One Big Beautiful Bill's changes could impact your retirement, so it's smart to review your financial plans to see if these strategies would help you get the most out of the new provisions.
-
Are You Getting a Gray Divorce? These Six Financial Strategies Come From a Financial Planner
Managing an equitable division of assets, selling a home, negotiating alimony and splitting retirement accounts are among the money matters that weigh as heavily as emotional issues.
-
The Tax Trap Snares Many Business Owners: A Financial Pro's Guide to 11 Strategies You May Be Missing
Poor tax planning means many business owners are leaving money on the table for the IRS. This detailed guide from a financial adviser highlights strategies you may not be aware of.
-
Your Golden Years Just Got a Tax Break, But There's a Catch
Don't fall for the 'tax-free Social Security' headlines. The OBBB offers a temporary tax deduction for certain retirees, which is different from eliminating taxes on benefits entirely — and it doesn't solve Social Security's long-term funding issues.