Nathaniel Ritchison
ABOUT Nathaniel

As a CERTIFIED FINANCIAL PLANNER™ professional, Nate through proactive planning and management helps individuals and families gain confidence and control over their financial situation so they can work toward accomplishing their retirement goals. Since 2002 he has been responsible for leading clients through the wealth management process, which includes guiding clients from goal setting to [...]

Nate Ritchison, CFP® answers your question of the week by sharing how to do tax smart investing by learning how investments will affect your taxes. There are different types of accounts where you can hold your money and they are all taxed at different rates. Investors have the option to invest in tax-deferred, tax free and taxable accounts. It’s important to be strategic with where you hold your money and which accounts you use to invest for more optimal tax savings.  By investing tax-efficiently and employing strategies such as tax loss harvesting, you’re able to save more in long term.


“Hi, I’m Nate Ritchison, CERTIFIED FINANCIAL PLANNER™ with Pure Financial Advisors, and this is Question of the Week. This week’s question is: How do my investments affect my taxes?There’re a couple things to consider.

Number one is how you how you save the money. You can use certain accounts to give you tax advantages–things like a deductible 401(k) or an IRA will give you tax deductions, but be careful because you’ll have to start paying taxes on those when you start withdrawing those funds. Other accounts like a Roth IRA don’t give you the tax deduction but they give you tax-free growth. So you have to be aware of how those dollars going in to that account are taxed in order to figure out how you’re going to pay tax down the road. Those are tax advantaged accounts.

The other thing you have to consider is anything outside of those types of retirement accounts would be a regular investment, a taxable investment account. The two things you have to consider on those are the gains and the income that are produced. The gains are going to be taxed typically if you’ve held it for over a year, at capital gains rates, which are always lower than your ordinary income tax rates. If you’ve held it for less than a year, you’ll be subject to that same ordinary income tax rate on those gains. The second thing is the income. The income on those investments are also going to be taxed. It depends if you have dividend income from stocks or if you have interest income from bonds. There are many different ways, but dividend income generally speaking is taxed the same rate as capital gains. Interest, however, can be either taxed at ordinary income tax rates or tax-free. An example of the ordinary income tax rate would be corporate bonds; you receive that income so you have to claim that on your tax return. However, with municipal bonds, you’re going to be subject to no tax–you actually get a tax advantage and tax re-growth in income off that.

Those are just some examples of ways that investments can affect your taxes. Again, my name is Nate Ritchison, with Pure Financial Advisors, and this has been Question of the Week.”