Passive Investing and San Francisco Tax Tips

Filed in CPA Blog by on August 30, 2014
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Broadly speaking, there are two ways to invest: actively and passively. Recently, passive investing has gained in popularity. In 2013, for instance, net investments into passive equity funds topped $60 billion, versus $3.4 billion for active funds. The most famous passive investment strategies involve using ‘index’ funds – funds that do not rely on human stock pickers, but rather rely on an index like the Dow Jones Industrial average, and just follow the index.

Investment Income and TaxesYou can read the full article in our September tax bulletin. But, if you are an investor, here are some interrelated tax issues to consider:

  • Tax-deferred or tax-free: different investment vehicles (ROTH IRAs vs. traditional IRAs) may make you pay taxes “now” or “later.” Which strategy is better? That depends on many factors, among them your income level today and your anticipated income level in the future, not to mention tax rates.
  • Inheritance issues – similarly, if you are investing, you might keep an eye to your heirs. Do you want to leave them an inheritance? If so, how can you minimize the tax implications of your assets?
  • Deductible investment related expenses. Let’s suppose you go to an investor conference to learn about investing, or the annual meeting of an index fund you have (well, not an index fund, but let’s say stock like those based in the Bay Area: Facebook, Twitter, LinkedIn, or Google).  Is that expense deductible?

We work with many high income individuals in the San Francisco Bay Area. Each situation is different, just as each investor’s propensity for risk is different. Reach out to us today at 415-742-4249 and ask about our estate planning services as well as help with the tax side of investing. You’ll be glad you did!

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