Our Summary Guide to Tax Efficient Investing
What is meant by a tax-efficient investment is often quite difficult to define. What is viewed as being tax-efficient for one individual may in fact be quite inefficient for another.
The quote “Don’t let the tax tail wag the investment dog” means don’t make investment decisions solely based on tax considerations. Nevertheless, it is certainly sensible to invest in a tax-clever and tax-efficient way.
For anyone considering making an investment there are several key tax related issues to consider, such as:
- What is the exit tax at the end of the investment?
- Am I better to have the return taxed as income or capital gains?
- What rate of tax do I pay on my returns?
- Should I invest as an individual or through a company structure?
For example, the tax treatment of investment returns can vary from 33% capital gains tax to 41% exit tax and even up to 54% income tax.
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Needless to say, tax is just one box that needs to be ticked when considering whether or not to invest in a particular product. My advice is simple – tax is a cost that you can’t ignore, however prior planning can often help to avoid future pain. While you shouldn’t let the tax structure be the main factor which influences your investment decision, it certainly warrants due consideration.
Gerard O’Brien LL.B LL.M CFP? QFA is a Certified Financial Planner and the Owner of Heritage Wealth Management, a Financial Planning practice based at 27 Cook Street, Cork. For more information, contact Gerard at [email protected] www.heritagewealth.ie
Disclaimer: All data and information provided within this article is for informational purposes only. Heritage Wealth Management Limited makes no representations as to accuracy, completeness, suitability, or validity of any information and will not be liable for any errors, omissions or delays in this information or any losses, injuries, or damages arising from its use.