Ivan Hernandez Discusses Tax-Efficient Asset Allocations with U.S. News & World Report
It is always a great time for investors to make sure their portfolios are tax efficient. This is especially true now due to the recent changes in the tax code from the Tax Cuts and Jobs Act, which lowered the 2018 federal tax brackets along with many revisions to tax deductions and other significant changes. Furthermore, due to the stock market’s current volatility, it is also prudent to review asset allocations in order to ensure that the strategy has not become unbalanced.
To help better understand how taxpayers can minimize their taxes, U.S. News & World Report recently sat down with Omnia Family Wealth Co-Founder Ivan Hernandez. In this article, Hernandez discusses the importance of creating tax-efficient asset allocations.
According to Hernandez, the location of certain securities in an investor’s portfolio can determine their tax burden. In order to capitalize on this tax-saving opportunity, Hernandez recommends that investors move corporate bonds, international bonds, high-yield debt, and other highly yielding fixed income securities to tax-sheltered accounts, such as individual retirement accounts. This process then enables the ordinary income that is produced by the bond to increase without annual taxes. The result is investors possibly yielding major tax savings, which Hernandez calls “the lower hanging fruit” of tax efficiency.
In addition to analyzing their current tax bracket status, taxpayers can also reduce how much they owe in taxes by creating tax-efficient asset allocations, establishing and funding a one-participant 401(k), harvesting your investment losses, funding a health savings account, creating a donor-advised fund for charitable giving, considering qualified charitable giving, and opening or funding a 529 plan.