Uncle Sam s. The goal of tax optimization is not to change the fundamental investment strategy, rather to fashion the portfolio content so that the client keeps the fruits of the investment strategy. For the fixed income portion of the client s portfolio there are several time-tested methods to reduce not only the ordinary but also the capital gains tax burden. Often times the skilful use of tax optimization techniques can reduce or eliminate taxes that should not be paid. Here are the 3 steps that asset managers need to follow that will flush out potential problems that should be acted on and corrected.
Most asset managers are aware that interest income is subject to the highest tax burden.
Client should keep as much of their portfolio returns as possible. Client should keep as much of their portfolio returns as possible. Determine the client s marginal tax bracket for federal and state income taxes. Analyze portfolio and determine the after tax income. Compare and contrast differing mixes of assets that enjoy partial or total exemption from taxes.