Tax Efficiency


DEFINITION of 'Tax Efficiency'

An attempt to minimize tax liability when given many different financial decisions. There is a wide variety of tax-efficient vehicles, including tax-efficient mutual funds, irrevocable trusts and tax-exempt commercial paper.

BREAKING DOWN 'Tax Efficiency'

Choosing the best tax-efficient investment can be a daunting task for those with little knowledge of the different types of products available. The best decision may be to contact a financial professional to determine if there is a way for you to make your investments more tax efficient.

  1. Tax-Exempt Commercial Paper

    An unsecured short-term loan, usually issued to finance short-term ...
  2. Irrevocable Trust

    A trust that can't be modified or terminated without the permission ...
  3. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  4. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  5. Tax Exempt

    To be free from, or not subject to, taxation by regulators or ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
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  1. Can mutual funds only hold stocks?

    There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
  2. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
  3. Do mutual funds pay interest?

    Some mutual funds pay interest, though it depends on the types of assets held in the funds' portfolios. Specifically, bond ... Read Full Answer >>
  4. Why have mutual funds become so popular?

    Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>
  5. Do mutual funds pay dividends?

    Depending on the specific assets in its portfolio, a mutual fund may generate income for shareholders in the form of capital ... Read Full Answer >>
  6. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>

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