Tax-Advantaged

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.

RELATED TERMS
  1. Qualifying Investment

    An investment purchased with pretax income. Money invested in ...
  2. 529 Savings Plan

    A tax-advantaged method of saving for future college expenses ...
  3. Municipal Investment Trust

    A type of unit investment trust (UIT) that invests solely in ...
  4. Qualified Trust

    A tax-advantaged fiduciary relationship between an employer and ...
  5. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  6. Tax Deferred

    Investment earnings such as interest, dividends or capital gains ...
Related Articles
  1. ETFs & Mutual Funds

    Building Your Own Portfolio to Match Your Goals

    Most of the retirement and tax-advantaged accounts we just introduced allow you to choose the investments that will be held within the account. In this section, we’ll take a look at some ...
  2. Financial Advisor

    Advising FAs: Explaining Estate Planning to a Client

    As the old saying goes, you can't take it with you. For this reason, it is important to have a current estate plan in place to protect your family and belongings.
  3. Retirement

    The Best Retirement Account For You

    There is a dizzying array of retirement accounts in America. Learn which is the right one for you.
  4. Retirement

    3 Tax-Reduction Strategies for High-Net-Worth Investors

    Learn about three tax strategies that reduce taxable income and minimize the share of taxes paid on employer-sponsored and individual investment accounts.
  5. Retirement

    5 Investments You Can't Hold In An IRA/Qualified Plan

    The list of prohibited investment vehicles is short, but it's important to know what is off limits.
  6. Retirement

    Rolling Over Your 401(k) in Times Of Volatility

    Learn the risks that come with rolling over a 401(k) in times of market volatility, and discover strategies that you can use to cope with these risks.
  7. Managing Wealth

    20 Investments: Unit Investment Trusts (UITs)

    What Is It? A unit investment trust (UIT) is a registered trust in which a fixed portfolio of income-producing securities is purchased and held to maturity. UITs usually hold a large amount of ...
  8. Retirement

    5 Lesser-Known Retirement And Benefit Plans

    These plans aren't widely used, but they fill a specific niche for employees in certain situations.
  9. Retirement

    The 401(k) and Qualified Plans Tutorial

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  10. ETFs & Mutual Funds

    Why You Should Invest In Municipal Bond ETFs

    These versatile instruments have become popular with investors in higher tax brackets and fill a specific niche in the wide selection of fixed-income offerings.
RELATED FAQS
  1. Can I rollover money and the required distribution from my traditional IRA to a ...

  2. Can you have both a 401(k) and an IRA?

    Discover how a retirement investor might choose between investing in a 401(k) and an IRA, and learn why he or she may benefit ... Read Answer >>
  3. What's the difference between an individual retirement account (IRA) and an annuity? ...

    Both IRAs and annuities are helpful retirement savings tools, but there have distinct difference you need to be aware of ... Read Answer >>
  4. Can a variable annuity be rolled into an IRA?

    Learn how to roll over your variable annuity to an IRA when you retire or change jobs. Here's how to do it without triggering ... Read Answer >>
  5. How do the returns on municipal bonds compare to those of other bonds?

    Learn how tax-free municipal bonds may provide better returns than other types of bonds, and understand the risks of municipal ... Read Answer >>
  6. What do cities do with the funds generated from municipal bonds?

    Learn more about municipal bonds, including the various types of bonds issued and the purposes of municipal bond funds, such ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center