A financial process is said to be tax efficient if it is taxed at a lower rate than an alternative financial process that achieves the same end.
What is ‘Tax Efficiency’
Tax efficiency is an attempt to minimize tax liability when given many different financial decisions. There are a variety of ways to obtain tax efficiency, including selecting tax efficient vehicles such as many exchange traded funds (ETFs) and municipal bonds, locating assets in the accounts such as Traditional or Roth IRAs and offsetting taxable capital gains with capital losses.
Explaining ‘Tax Efficiency’
Choosing the best tax-efficient investment can be a daunting task for those with little knowledge of the different types of products available. The best decision may be to contact a financial professional to determine if there is a way for you to make your investments more tax efficient.
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