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Tax-Aware Fixed Income Solutions

Tax-Aware Fixed Income Solutions

Our portfolio management team has a wealth of experience in navigating a range of tax circumstances on behalf of our clients, across the state and federal level.

Tax Aware Management: Capital Gains Tax Management

When capital losses reach a threshold deemed meaningful by our investment team, Breckinridge pursues selling at a loss to offset current and/or future capital gains with the intention of optimizing an investor’s after-tax income.

Tax-Loss Harvesting (Federal and State)

Systematic tax loss monitoring, crossing, and harvesting.
Investment professional oversight of process.

Read more about our Tax Loss Crossing and Tax Loss Harvesting capabilities here.

Tax Management: Income Tax

For over 30 years, our portfolio management team has incorporated client specific tax considerations as a key tenet of tax-aware portfolio construction.

State Preference (State Income Tax)

We offer over 30 state preference options.

Approach

Confirm income tax treatment based on client’s state of residence.
Consider availability of in-state paper and latency time.
Apply state tax rate when determining security selection.

After-Tax Crossover (Federal Income Tax)

Tactical: Relative Value Trade Between Tax-Exempt Munis and Taxable Bonds
Strategic: Multi-Strategy SMA Offering

For more information or to see a sample of after-tax client reporting, please fill out the form below or reach out to our Consultant Relations team at CR@breckinridge.com.

Request More Information

Fill out the form to request more information on our tax-aware fixed income solutions.

Breckinridge is not a tax advisor and does not provide tax advice. Investors should consult with their tax professional before making any investment decisions. This material provides general information and should not be construed as a solicitation or offer of services or products or as legal, tax or investment advice. Nothing contained herein should be considered a guide to security selection, asset allocation or portfolio construction. All portfolio needs and customization requests are subject to review and approval. Breckinridge does not accept all requests. Past performance is no guarantee of future results. No assurances can be given that any Breckinridge strategy or approach will meet their investment objectives or incur profits. All investments involve risks, including the loss of principal. No investment or risk management strategy, including diversification, can guarantee positive results, a profit, or risk elimination or protection in any market. Periods of elevated market volatility can significantly impact the value of securities. Investors should consult with their advisors to understand how these risks may affect their portfolios and to develop a strategy that aligns with their financial goals and risk tolerances.

Tax-aware management includes the potential impact of any tax-loss harvesting and/or tax-loss crossing (depending on client preferences) that occurred during the reporting period and assumes any losses achieved will be used to offset gains elsewhere in a client’s portfolio. Trading for the purpose of tax loss harvesting may result in increased transaction costs. Replacement bond may be at a higher price and value of replacement bond may go down. Tax benefits of tax-loss harvesting may change or be limited due to potential legal changes or challenges by the IRS. The effectiveness of a tax-loss harvesting (TLH) strategy is largely dependent on each client’s entire tax and investment profile, including investments made outside of Breckinridge’s advisory services. As such, there is a risk that the TLH strategy used is not the most effective for every client and will not produce the benefits as described. When using cross transactions for TLH, the participating client accounts gain exposure to the tax-loss harvested bonds, which are subject to price fluctuations, received from other accounts.

The effectiveness of a tax loss harvesting strategy is largely dependent on each client’s entire tax and investment profile, including investments made outside of Breckinridge’s advisory services. As such, there is a risk that the strategy used to reduce the tax liability of the client is not the most effective for every client. To the extent that a client’s custodian uses a different cost basis or tax lot accounting, tax efficiencies may be greater or lower than Breckinridge’s estimates. Tax loss harvesting may generate a higher number of trades in an account due to our attempt to capture losses. This can mean higher overall transaction costs to clients. Further, a client account may
repurchase a bond at a higher or lower price than the price at which the original bond was sold.

Cross transactions will be used to facilitate tax loss harvesting in most cases. When using cross transactions for tax loss harvesting, participating client accounts gain exposure to the tax-loss harvested bonds received from other accounts. While Breckinridge generally selects bonds that, in its best judgement, will not change significantly in price, bonds nevertheless are subject to fluctuations in price, and the bonds received may go up or down in value.

Federal and local tax laws and rates can change at any time; changes to tax laws and rates can impact tax consequences for clients. Further, the Internal Revenue Service (IRS) and other taxing authorities have set certain limitations and restrictions on tax loss harvesting. The tax consequences of Breckinridge’s tax loss strategy may be challenged by the Internal Revenue Service. Breckinridge is not a tax advisor and does not provide personal tax advice. Clients should consult with their tax professionals regarding tax loss harvesting strategies and associated consequences.

The content is current as of the date indicated in the material. All information, including the opinions and views of Breckinridge, is subject to change without notice. For more current information, please contact our consultant relations team at cr@breckinridge.com.