Two investors can own the same funds, earn the same return before tax, and end up with very different amounts. The difference is often in where the investments are held and when they are sold. For a portfolio of $2 million or more, those choices add up over time.
This is not about avoiding taxes. It is about not paying more than you have to on decisions that were within your control.
Where Florida helps and where it does not
Florida has no state income tax, which is a real advantage for investors here. It also changes some of the usual advice. A New York or California investor often buys in-state municipal bonds to avoid state tax as well as federal. A Florida investor gets no extra benefit from doing so, so a national or diversified municipal bond fund is usually a better fit.
Federal tax still applies in full, and for higher earners the rates are high enough to matter:
Long-term capital gains are taxed at 15% for most investors, and 20% once taxable income passes $613,700 for married couples filing jointly ($545,500 for single filers) in 2026.
A 3.8% net investment income tax applies to investment income when modified adjusted gross income exceeds $250,000 for married couples ($200,000 for single filers). Those thresholds are not adjusted for inflation, so more households reach them each year.
Interest, non-qualified dividends and short-term gains are taxed at ordinary income rates, which can be as high as 37%.
Asset location
Asset location means deciding which account holds which investment. Every dollar of return is the same, but it is taxed differently depending on the account. The key here is focusing on improving your after-tax returns.
| Account type | What tends to fit | Why |
|---|---|---|
| Taxable brokerage | Broad stock index funds, ETFs, municipal bonds, investments you plan to hold a long time | Gains are taxed only when you sell, and qualified dividends and long-term gains get lower rates |
| Traditional IRA or 401(k) | Taxable bonds, funds with high turnover, REITs | Their income would be taxed at ordinary rates in a taxable account; here it grows tax-deferred |
| Roth IRA | Investments with the highest expected growth | Growth is tax-free if the rules are met, so the most growth belongs here |
This is a rule of thumb, not a rule. The right mix depends on the size of each account, how soon you will need the money and what you plan to leave to heirs. Done well, it can add value without changing how much risk you take.
Managing gains
A few habits make a difference in a taxable account:
Hold for more than a year. A gain on an asset held longer than one year is taxed at the lower long-term rate rather than as ordinary income.
Choose which shares you sell. If you bought a stock at different times, you can usually pick specific lots, selling those with the highest cost basis first to reduce the gain.
Pair gains with losses. Losses can offset gains in the same year, and up to $3,000 of excess loss can offset ordinary income, with the rest carried forward.
Watch the calendar. A sale in January rather than December moves the tax bill by a year. Large sales are worth planning around other income.
Tax-loss harvesting
When an investment is worth less than you paid, selling it creates a loss you can use against gains. You can then reinvest in something similar, so your market exposure stays about the same. The wash-sale rule disallows the loss if you buy the same or a substantially identical security within 30 days before or after the sale, so the replacement has to be chosen with care.
Harvesting does not eliminate tax. It defers it, because the lower cost basis means a larger gain later. Its value is greatest for people who expect to give shares to charity, hold until death, or be in a lower bracket in the future. Some investors use direct indexing, which holds many individual stocks instead of a fund, to create more chances to harvest losses. It also comes with higher costs and complexity, so it is not right for everyone.
Other options to consider
Roth conversions in years when your income is lower, which means paying tax now in exchange for tax-free growth later.
Giving appreciated shares to charity or a donor-advised fund in place of cash.
Municipal bonds for the part of the portfolio meant for income, especially for those in the highest brackets. Whether they are better than taxable bonds depends on the yield difference and your bracket.
Fund choice. Index funds and ETFs often distribute fewer capital gains than actively managed funds, which means less tax each year.
Questions to ask your advisor
Which accounts hold which investments, and why?
How much of my return did I lose to taxes last year?
Do we review gains and losses before year end, or after?
Is there a coordinated plan with my CPA?
Let’s Talk
If you have not looked at how your accounts are arranged, or how much of last year’s return went to taxes, that is a reasonable place to begin. Meira Wealth works with clients and their CPAs on these questions. Contact us or call us at (305) 670-4440. ¿Prefiere hablar con nosotros en español? Contamos con miembros de nuestro equipo que hablan español.
Frequently Asked Questions
What is asset location?
It is the practice of deciding which investments to hold in which type of account, such as taxable, traditional retirement, or Roth, so that less of your return is lost to tax.
Does Florida tax investment income?
Florida does not have a state income tax, so there is no state tax on interest, dividends, or capital gains. Federal income tax, and the 3.8% net investment income tax for higher earners, still apply.
How does tax-loss harvesting work?
You sell an investment that has fallen in value to realize a loss, use that loss to offset gains or up to $3,000 of ordinary income, and reinvest in a similar but not substantially identical investment. The wash-sale rule disallows the loss if you buy back the same or a substantially identical security within 30 days.
Are municipal bonds a good idea for a Florida investor?
It depends on your tax bracket and the yield compared with taxable bonds. Municipal bond interest is generally exempt from federal income tax. Because Florida has no state income tax, there is usually no added benefit in buying only Florida bonds.
This article is provided for informational and educational purposes only. It does not constitute personalized financial, investment, tax, or legal advice or a recommendation, and reading it does not establish an advisory relationship with Meira Wealth. Investing involves risk, including the possible loss of principal. There is no guarantee that any strategy or plan will achieve its objectives. Past performance is not indicative of future results. Please consult with a qualified professional regarding your specific situation. For more information about Meira Wealth, please review our Form ADV Part 2A and Form CRS, available on our website.
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