top of page

What is the difference between taxable and tax-free investments?

Curious about Taxes Investment

What is the difference between taxable and tax-free investments?

Taxable investments are those in which investors must pay taxes on the earnings or gains made from the investment. Examples include stocks, mutual funds, and bonds held in nontaxadvantaged accounts such as individual or joint brokerage accounts. The taxes owed on these investments are based on the gains realized when the investments are sold or distributed.

Taxfree investments, on the other hand, are investments where earnings are not subject to federal or state income taxes. Examples of taxfree investments include municipal bonds, Roth IRAs, Health Savings Accounts (HSAs), and 529 college savings plans. In general, taxfree investments are used to reduce or eliminate the amount of taxes an investor must pay on their investments.

bottom of page