DEFINITION of 'Tax-Advantaged'

Any type of investment, account or plan that is either exempt from taxation, tax-deferred or offers other types of tax benefits. Examples of Tax-Advantaged investments are municipal bonds, partnerships, UITs and annuities. Tax-advantaged plans include IRAs and qualified plans.

BREAKING DOWN 'Tax-Advantaged'

Tax-advantaged investments and accounts are used by a wide variety of investors and employees in various financial situations. High-income taxpayers seek tax-free municipal bond income, while employees save for retirement with IRAs and employer-sponsored retirement plans. Selecting the proper type of tax-advantaged accounts or investments depends on an investor's financial situation.

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