Tax Burden

Mid-year is an excellent time to reassess your financial strategies and make sure you’re taking advantage of opportunities to reduce your tax liability. That begins with understanding the “ADCs” of reducing your tax burden:


Avoiding taxes is not the same as evading taxes. Tax avoidance involves reducing your overall tax liability through provisions in the tax law, including exclusions, tax credits, and deductions. Exclusions apply to income that is not required to be reported such as tax-free interest earned on municipal bonds. Tax credits, like qualifying child care expenses, provide dollar-for-dollar reductions in tax liability. And deductions such as alimony paid reduce taxable income. Consult your tax advisor to determine the exclusions, credits and deductions that apply to your specific situation.


Deferring or postponing taxes on income to a future date when you anticipate your tax rate to be lower can be highly advantageous. While it does not eliminate taxes owed, in certain cases it can help reduce your overall tax burden. If you contribute to a 401(k) or Traditional IRA, you’re already familiar with this concept. Your current taxable income is reduced by the amount of qualifying contributions to your plan. Both contributions and earnings grow tax-free until you take distributions, usually upon retirement when you may be in a lower income tax bracket.


Seeking opportunities to convert ordinary income into long-term capital gains which are taxed at a more favorable rate is a common practice for lowering your overall tax liability. For example, short-term capital gains from the sale of stocks, collectibles, or artwork held for 12 months or less are treated as ordinary income and subject to the taxpayer's marginal tax rate. However, if you can hold the investment for more than 12 months before taking gains, the gains will be subject to more favorable long-term capital gains rates.

Before pursuing any strategy designed to reduce taxes, meet with your financial advisor and tax professional for guidance on the best approach for your financial situation. For guidance or assistance, please contact one of our Investment Representatives at your convenience.

This information is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.

Securities and insurance products offered through Cetera Investment Services LLC (doing insurance business in CA as CFGIS Insurance Agency), member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC. Cetera Investment Services LLC and Cetera Investment Advisers LLC are not affiliated with the financial institution where investment services are offered. Investments are: *Not FDIC/NCUSIF insured *May lose value *Not financial institution guaranteed *Not a deposit *Not insured by any federal government agency. Advisory services may only be offered by investment adviser representatives in conjunction with an advisory services agreement and disclosure brochure as provided.