Tax Coordination: How to Align Your Accounts and Save on Taxes

When you manage multiple investment accounts, tax coordination, the strategic alignment of your investment accounts to minimize tax liability. Also known as tax-efficient investing, it’s not about avoiding taxes—it’s about working with them so your money grows faster. Most people treat their 401(k), Roth IRA, and taxable brokerage account like separate boxes. But the truth? They’re parts of one system. If you don’t coordinate them, you’re leaving money on the table.

For example, holding bonds in your 401(k), a tax-deferred retirement account that delays taxes until withdrawal and stocks in your taxable brokerage account, an investment account where you pay taxes on dividends and capital gains each year can cut your tax bill by hundreds or even thousands over time. Why? Because bonds generate more taxable income than stocks. Put them where taxes are deferred, and let stocks grow longer in the taxable account where you pay lower capital gains rates. This is called asset location, the practice of placing different types of investments in the most tax-efficient accounts. It’s not fancy. It’s not secret. But most people never do it.

And it’s not just about where you put your investments—it’s about when you sell them. capital gains tax, the tax you pay when you sell an investment for more than you paid can be 0%, 15%, or 20% depending on your income. If you rebalance your portfolio without thinking about taxes, you might trigger a big bill just because you sold a fund that had grown too big. But if you use tax-aware rebalancing—selling only what’s needed, using new contributions to adjust weights, or harvesting losses—you can keep more of your gains. That’s tax coordination in action.

It’s not just for experts. You don’t need a CPA to start. If you’ve maxed out your retirement accounts and still have money to invest, you’re already in the game. If you’ve ever wondered why your portfolio feels like it’s growing slower than it should, the answer might be hiding in how your accounts talk to each other—or don’t. Below, you’ll find real examples of how people are saving on taxes by connecting their accounts smarter, not harder. No jargon. No theory. Just what works.