Displaying items by tag: tax

Investors’ demand for tax-efficient investing is fueling rapid growth in separately managed accounts (SMAs), which now top $500 billion in tax-managed assets—up 67% since 2022. Unlike mutual funds or ETFs, SMAs allow investors to directly own securities, enabling personalized tax management such as loss harvesting. 

Direct indexing remains the most popular strategy, but providers are expanding into active equity and fixed-income SMAs to capture additional tax alpha. Challenges arise with active managers, since balancing loss harvesting with stock-picking discipline can dilute investment ideas, though new approaches like substitute stock lists aim to resolve that. 

Fixed-income SMAs offer fewer opportunities, but rising rates in recent years did create harvesting potential, while model portfolios are also integrating tax-aware transitions to ease client moves without triggering large gains. 

Finsum: Overall, tax-managed SMAs are expanding across asset classes and portfolio models, giving advisors more tools to reduce investors’ tax burdens.

Taxes shouldn’t dictate your investment decisions, but they should definitely inform them,  especially if you’re holding assets in taxable accounts where after-tax returns matter most. Smart investors know that choosing the right account type such as Roth IRAs, traditional 401(k)s, or HSAs can make a big difference in long-term performance by deferring or avoiding taxes altogether. 

Tax-deferred accounts often outperform taxable ones over time, especially when you're in a high tax bracket or expect to drop into a lower one in retirement. A diversified mix of taxable, tax-deferred, and tax-free accounts can give you more control over your income strategy and tax liability in retirement. 

Beyond account choice, selecting tax-efficient investments like municipal bonds or low-turnover ETFs can reduce the drag of taxes on earnings, especially when every percentage point counts. 

Finsum: In the end, tax-savvy investing isn't about dodging the IRS, it's about maximizing what you keep and using tax rules to your advantage.

A new provision quietly inserted into President Donald Trump’s latest tax bill would give private equity firms expanded tax breaks when they acquire companies and burden them with debt. This language, buried in the One Big Beautiful Bill Act, would increase the allowable deduction on interest payments—effectively subsidizing leveraged buyouts that often result in layoffs, wage cuts, and bankruptcies. 

Despite the provision’s potential to drive billions in tax savings for Wall Street, lawmakers have downplayed its implications, describing it only as an increase in business interest deductibility. 

By altering how interest deductions are calculated—without raising the 30% cap—the bill could hand private equity firms up to a 15% increase in write-offs, according to legal and budget analysts. Over the next decade, this tax tweak is projected to cost the government $200 billion in lost revenue, deepening concerns about corporate accountability and tax fairness.

Finsum: If CNL capital is a well-positioned private equity firm that could be in a good position to benefit to these legal changes. 

Tax-efficient investing is gaining momentum, with separately managed accounts (SMAs) emerging as a preferred tool for personalization and tax savings. Unlike mutual funds or ETFs, SMAs allow investors to directly own securities, enabling tailored strategies like tax-loss harvesting. 

Assets in tax-managed SMAs have surged past $500 billion, a 67% increase since 2022, with direct indexing leading the way due to its scalability and precision. Asset managers are now extending tax overlays to active equity strategies, though the process is more complex due to potential conflicts with managers’ top stock picks. 

Meanwhile, model portfolios are incorporating tax-aware transition tools to help advisors move clients into new strategies with minimal tax impact, further expanding the reach of tax management across investor segments.

Finsum: Fixed-income SMAs offer fewer tax opportunities but can still provide benefits during periods of rate volatility or credit stress.

Despite the sharp market sell-off, financial advisors say the downturn could present timely tax planning opportunities. Tax-loss harvesting—selling underperforming assets to offset capital gains or reduce taxable income—has become a key strategy as investors navigate recent volatility. 

Certified financial planner Sean Lovison emphasizes this as a way to find a “silver lining” amid losses, especially since excess losses can be carried forward into future tax years. Roth IRA conversions are also gaining attention; converting traditional IRA funds during a dip allows for potential tax-free growth once markets rebound, though timing and tax implications must be carefully considered. 

Additionally, the window to contribute to a Roth IRA for 2024 remains open until April 15, offering a chance to buy in at lower asset prices while securing future tax-free retirement growth. 

While losses sting, this environment may reward those who act decisively on smart financial strategies.