{"id":27,"date":"2022-01-22T19:37:26","date_gmt":"2022-01-22T19:37:26","guid":{"rendered":"https:\/\/moneymakersandsavers.com\/?p=27"},"modified":"2022-01-22T19:39:14","modified_gmt":"2022-01-22T19:39:14","slug":"taxable-investment-accounts","status":"publish","type":"post","link":"https:\/\/moneymakersandsavers.com\/taxable-investment-accounts\/","title":{"rendered":"Taxable Investment Accounts &#8211; What Are They and What Are Their Benefits?"},"content":{"rendered":"\n<p><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_55 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-661627033b515\"><span class=\"\"><span style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #4ff74c;color:#4ff74c\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #4ff74c;color:#4ff74c\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-661627033b515\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/moneymakersandsavers.com\/taxable-investment-accounts\/#What_are_taxable_investment_accounts\" title=\"What are taxable investment accounts?\">What are taxable investment accounts?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/moneymakersandsavers.com\/taxable-investment-accounts\/#Advantages_of_using_a_taxable_investment_account\" title=\"Advantages of using a taxable investment account!\">Advantages of using a taxable investment account!<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/moneymakersandsavers.com\/taxable-investment-accounts\/#Strategies_you_can_use_to_lower_your_taxable_income_when_using_a_taxable_investment_account\" title=\"Strategies you can use to lower your taxable income when using a taxable investment account!\">Strategies you can use to lower your taxable income when using a taxable investment account!<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what-are-taxable-investment-accounts\"><span class=\"ez-toc-section\" id=\"What_are_taxable_investment_accounts\"><\/span><strong>What are taxable investment accounts?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><\/p>\n\n\n\n<p>No matter who you open an investment account with, most typically offer the regular taxable investment account. Unlike tax-deferred investment accounts, like traditional IRAs, 401ks, Roth IRAs, and etc., taxable investment accounts count as extra income every year when you sell for a gain or are paid <a href=\"https:\/\/moneymakersandsavers.com\/what-are-dividends-and-how-are-they-taxed\/\" data-type=\"post\" data-id=\"993\">dividends<\/a> from your investments. This makes them noticeably less tax-efficient than tax-deferred accounts. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"advantages-of-using-a-taxable-investment-account\"><span class=\"ez-toc-section\" id=\"Advantages_of_using_a_taxable_investment_account\"><\/span><strong>Advantages of using a taxable investment account!<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><\/p>\n\n\n\n<p>There are, however, a few advantages to using a regular taxable investment account along with tax-deferred ones though. The first being that while you might have to pay some taxes on them, unlike the tax-deferred accounts like traditional 401ks\/IRAs, you do not have to also pay an extra penalty fee for withdrawing the money before the minimum retirement age of 59 1\/2. Another benefit from using taxable accounts is that you are not legally required to take a minimum amount out of them starting at 70 1\/2 and with <a href=\"https:\/\/moneymakersandsavers.com\/traditional-and-roth-401k\/\" data-type=\"post\" data-id=\"242\">401ks<\/a> and <a href=\"https:\/\/moneymakersandsavers.com\/traditional-iras-and-roth-iras\/\" data-type=\"post\" data-id=\"33\">IRAs<\/a> you have to. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"https:\/\/cdn.dnaindia.com\/sites\/default\/files\/styles\/full\/public\/2017\/07\/27\/596090-investment-thinkstock-072717.jpg\" alt=\"what are taxable investment accounts?\"\/><\/figure><\/div>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"strategies-you-can-use-to-lower-your-taxable-income-when-using-a-taxable-investment-account\"><span class=\"ez-toc-section\" id=\"Strategies_you_can_use_to_lower_your_taxable_income_when_using_a_taxable_investment_account\"><\/span><strong>Strategies you can use to lower your taxable income when using a taxable investment account!<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><\/p>\n\n\n\n<p>There are also some strategies you can use to minimize your tax burden. One is to invest in municipal bond funds. Municipal bond funds invest in many individual municipal bonds at once, similar to how <a href=\"https:\/\/moneymakersandsavers.com\/what-are-etfs\/\" data-type=\"post\" data-id=\"1013\">ETFs<\/a> invest in multiple single companies at once. The tax advantage of municipal bonds is that the <a href=\"https:\/\/moneymakersandsavers.com\/what-are-dividends-and-how-are-they-taxed\/\" data-type=\"post\" data-id=\"993\">dividends<\/a> they pay are free from at least federal income taxes. If you invest with one from the state of your primary residence you also don&#8217;t need to pay state income tax on it.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p>There are also tax advantages for anyone who inherits the money in taxable accounts as well. This tax situation is called step-up in basis. As an example, an investor purchasing a share at $2 and leaving them to an heir when the shares are $15 means the shares receive a step-up in basis, making the&nbsp;cost basis&nbsp;for the shares the current&nbsp;market price&nbsp;of $15. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<p>Any capital gains tax paid in the future will be based on the $15 cost basis, not on the original&nbsp;purchase price&nbsp;of $2. The shares appreciated 7.5 times in value before they were inherited, so after the inheritance, the total savings on capital gains tax would be reflected about that much in the amount of total taxes to be paid pre and post-inheritance. (Source: Nerdwallet.com). This is not an advantage shared by investments held in tax-deferred accounts.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p>One final strategy to make your taxable investment account more tax efficient is tax-loss harvesting. This is when you minimize your total taxable income by selling some of your investments for up to $3000 in losses for each year. You can only go up to $3000 in one year, but any extra losses on your investments can be carried over to minimize the next year&#8217;s total taxable income.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>Disclaimer: I am not any sort of investment or financial professional giving any sort of legal advice. I&#8217;m just some guy trying to teach other people about how they might navigate the financial world.<\/strong><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>Note: This page contains affiliate links that will, at no cost to you, earn me a commission. You are in no way obligated to click on the links!<\/strong><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>Click here to start investing with M1 Finance!<\/strong> <a href=\"https:\/\/m1finance.8bxp97.net\/4edv5o\" target=\"_blank\" rel=\"noreferrer noopener sponsored\">https:\/\/m1finance.8bxp97.net\/4edv5o<\/a><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>Click here to start investing with Robinhood!<\/strong> <a href=\"https:\/\/robinhood.c3me6x.net\/qny0Bg\" target=\"_blank\" rel=\"noreferrer noopener sponsored\">https:\/\/robinhood.c3me6x.net\/qny0Bg<\/a><\/p>\n\n\n<form role=\"search\" method=\"get\" action=\"https:\/\/moneymakersandsavers.com\/\" class=\"wp-block-search__button-outside wp-block-search__text-button wp-block-search\"    ><label class=\"wp-block-search__label\" for=\"wp-block-search__input-1\" >Search<\/label><div class=\"wp-block-search__inside-wrapper \" ><input class=\"wp-block-search__input\" id=\"wp-block-search__input-1\" placeholder=\"\" value=\"\" type=\"search\" name=\"s\" required \/><button aria-label=\"Search\" class=\"wp-block-search__button wp-element-button\" type=\"submit\" >Search<\/button><\/div><\/form>\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>What are taxable investment accounts? No matter who you open an investment account with, most typically offer the regular taxable investment account. Unlike tax-deferred investment accounts, like traditional IRAs, 401ks, Roth IRAs, and etc., taxable investment accounts count as extra income every year when you sell for a gain or are paid dividends from your&#8230;<\/p>\n","protected":false},"author":159998695,"featured_media":2642,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_kadence_starter_templates_imported_post":false,"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"footnotes":""},"categories":[1362,1368],"tags":[1385,1389],"_links":{"self":[{"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/posts\/27"}],"collection":[{"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/users\/159998695"}],"replies":[{"embeddable":true,"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/comments?post=27"}],"version-history":[{"count":0,"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/posts\/27\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/media\/2642"}],"wp:attachment":[{"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/media?parent=27"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/categories?post=27"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/moneymakersandsavers.com\/wp-json\/wp\/v2\/tags?post=27"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}