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Investing your money is the best way to plan for the future and improve your financial situation for retirement. But if you don’t consider your taxes when investing, you could be minimizing your returns and opening yourself up to potential losses. 

The problem is, a lot of new investors struggle to get their heads around the tax implications of investing and so they make some big mistakes. These are the most common tax mistakes that new investors make. 

Not Considering Tax When Choosing Investments

The biggest mistake you can make is choosing investments without considering the tax implications. When you are deciding what to invest in, you need to weigh up a lot of different factors including the risks and the potential gains. However, you also need to consider the tax that you will have to pay on any profits you make so you have an idea of how much you will actually be able to draw out of your investment and spend. In some cases, even if an investment promises higher potential gains, it’s not the best choice because any profits are highly taxed. Make sure that you factor in the tax implications when you are developing an investment strategy or your profits may be much lower than you first expected. 

Not Taking Expert Advice

The tax implications of investing can be quite complicated and if you are new to the world of investing, you are probably missing a lot of great opportunities to cut your tax bill. That’s why it’s so important that you take expert advice. Financial advisors like the ones you find at Veracitycapital.com can assess your investment portfolio for you and reorganize things to improve your tax situation. But a lot of people don’t take this expert advice and they think that they can manage things on their own, so they end up paying more tax than they need to. 

Missing Opportunities With Charitable Donations

Donating money to charity is a brilliant way to use your investment profits for something positive while also getting some great tax breaks for yourself. However, a lot of people don’t manage their charitable donations in the right way and they miss out on some golden opportunities. Instead of donating in cash, you can use appreciated stock to make a donation if you have a donor-advised fund. Visit Investopedia.com for more info on donor-advised funds and how you can use them to reduce your tax burden. 

Not Harvesting Tax Losses

New investors assume that selling stocks at a loss is always a bad thing, but that isn’t actually true. Tax loss harvesting is a technique that investors use to reduce their tax burden and involves selling stocks at a loss. Once the stocks have been sold, they are replaced with a similar stock, and the loss made from the sale can be used to offset any gains made on other investments, which means that the tax burden is reduced. Knowing how to use tax loss harvesting to your advantage is essential if you are serious about investing. 


Make sure to avoid these common tax mistakes and you will see a much bigger return on your investments.