Tax Planning - J.P. Morgan Asset Management

Tax Planning

One easy way to maximize your return potential is to minimize taxes. By making tax-smart investment decisions, you can reduce the amount lost to the IRS each year and keep more of your earnings for current or future needs.


Growing need for tax relief

The average American pays more for taxes than food, clothing and housing combined1. Without the proper planning, investment earnings can make your tax burden even heavier.

Higher total return potential

For investors in the highest federal tax bracket, taxes can reduce an 8% annual return to as low as 4.5%. Over time, that may mean the difference between reaching a financial goal and falling short.

The power of tax-advantaged compounding

Investment earnings within IRAs, 401(k)s, annuities and certain education accounts are not subject to current year taxes. Because money that would otherwise go toward taxes remains in your account, it has the potential to compound and grow faster for the future. Depending on the account, taxes are either deferred until qualified withdrawals begin or eliminated altogether. Your financial advisor can tell you more.

Favorable tax rules

Under current laws, tax breaks that were set to expire in 2011 have been made permanent. This allows you to avoid federal taxes on qualified withdrawals from 529 college savings plans and to make higher contributions to employer-sponsored retirement accounts and IRAs.

1Source: Tax Foundation, 2010

Strategies for cutting taxes

Offset taxable gains with losses

If your advisor recommends it, consider realizing investment losses before year-end to reduce capital gains taxes.

Donate and deduct

When donating an investment to charity, you can generally take a tax deduction for the full market value, meaning you avoid capital gains taxes on any appreciation.

Consider tax-free municipal bond funds

Interest income from municipal bonds is not typically taxed by the federal government or state in which a bond is issued.

Invest for dividends

While interest income is taxed at rates as high as 40.8% (37% tax rate plus 3.8% Medicare surtax), taxes on qualified dividends top out at just 23.8% (20% maximum rate plus 3.8% surtax).2

Maximize tax-advantaged accounts

Contribute as much as possible to tax-advantaged accounts for retirement or education. If you're 50 or older, you can make additional catch-up contributions to employer-sponsored retirement plans and IRAs.

Invest for the long term

Investments sold at a profit after more than one year qualify for favorable tax rates as long-term capital gains.

Consult an advisor

A financial professional or tax advisor can tell you if these or other strategies meet your individual needs.

2Qualified dividends are taxed at 0% if taxable income is below $77,200 for married filing jointly, $51,700 for head of household, or $38,600  for filing single or married filing separately; 15% tax rate if taxable income exceeds the 0% threshold but below $479,000 for married filing jointly, $452,400 for head of household, $425,800 for filing single, or $239,500 if married filing separately. The Medicare surtax of 3.8% is applied to the lesser of net investment income or the excess of modified adjusted gross income over $200,000 for single taxpayers and $250,000 for married couples filing jointly.

Learn more about taxes and your investments

Ready to get started?

For more specific information, you can visit, and refer to Publication 17: Your Federal Income Tax. Consult your advisor for helpful tips on building an investment portfolio to meet your tax management needs and other financial goals.

The information above is not intended to provide and should not be relied on for accounting, legal and tax advice or investment recommendations. The views and strategies described may not be suitable to all readers. Please contact your financial professional or tax advisor for additional information.

IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.