Master Limited Partnerships (MLPs) Another financial instrument which is getting popular when it comes to saving taxes in the current low interest rate regime is master limited partnerships (MLPs). These instruments have also become popular because of the higher yield in comparison to other instruments like treasury bonds, bank CDs, or money-market accounts. MLP’s can operate at a loss particularly in the first few years particularly in industries like developing oil and gas pipelines due to high depreciation and hence reduced net earnings.  However after the initial phase MLP’s will in probability generate free cash flow in excess of earnings on which taxes are not levied until the owner sells the unit as it is treated as a return on capital. Approximately 80% of MLP distributions are labelled as return on capital. High yields on MLP’s is another factor that makes this an important  [...]

The times are definitely hard and in these hard times taxes can be a big drain on one’s pocket. One easy and very effective way to save on taxes is by investing in tax saving instruments. But is it so simple. Not all investments will get you the same tax benefit. In fact I would like to modify my earlier statement and say that the best way to save on taxes is to invest judiciously.  For instance one way of reducing tax liability is to hold on to investments for longer period of time. You will in all probability be taxed higher if you sell off your investments earlier than its total life. However holding all investment assets for a long time will not help in saving taxes. It is important to understand which assets should be held for a longer period to get maximum tax benefits. In short investors need to understand the methods of financial planning that will help them reduce their tax  [...]