Tax-efficient investing is well worth careful planning and implementation. There are two reasons for this: First, you lose the money you pay in taxes, and second, you lose the growth that money would have generated if it were still invested.
Most investors know that if you sell an investment, you may owe taxes on any gains. But you could also be on the hook if your investment distributes its earnings as capital gains or dividends regardless of whether you sell the investment or not. And interest-earning investments, along with dividend-paying stocks, will be added to your taxable income if these are distributed to your taxable trading or brokerage account.
