As you read on Wednesday, it’s critical to pay attention to how and what you invest in a taxable account.  Your goal should be to keep as much money in your account as possible and minimize your tax burden.

Here are three ways to help you meet that goal and get the most out of your taxable account.

1. Take Advantage of Long Term Capital Gains: In taxable accounts, if you hold an investment for more than a year, you can obtain lower tax rates on gain and distributions generated from that investment.  For 2014, the tax rates on long-term capital gains are:

• 0% if your taxable income is in the 10% or 15% marginal brackets
• 15% if your taxable income falls in the 25%, 28%, or 35% marginal tax brackets
• 20% if your taxable income falls in the 39.6% marginal tax bracket

No matter what marginal tax bracket you fall under, your tax rate will be lower if you hold your investments for longer than a year. However, if you fall short of that year and one day, you are taxed at your ordinary income tax rates. In addition, if you’re a high-income earner, you may be subject to the new 3.8% Medicare surcharge on investment income, making your total tax rate 43.4%! Your best bet will be to hold the investment for the required time frame and take advantage of the lower rate.

2. Tax-Loss Harvesting: In addition to lower tax rates, you can also manipulate your accounts to avoid any taxable gains at all.  In the technique called tax-loss harvesting, you sell an investment from which you have sustained a loss to offset any gains or income in your portfolio.

You can accomplish this in a few ways. You can either sell your investment, keep the proceeds from the sale in cash, and buy the fund back in 31 days. (31 days is important because of the IRS’ wash-sale rule.)

Or instead of investing in cash, you can buy a similar but not identical fund. For instance, if you took a loss on Fidelity’s Spartan Total Stock Market Index Fund, you could immediately exchange the money into a fund that tracks a similar but different index, like the Vanguard 500 Index Fund. 

You have to be careful here, though, to make sure you have a basis for saying the investments are not identical. While the rule is fact specific, you would likely have a hard time explaining how Fidelity’s Spartan Total Market Fund is not identical to Vanguard’s Total Market Fund.

You are harvesting the loss to prevent any overall capital gain. In addition, you avoid getting rid of an investment that you like and that might disrupt your overall investing strategy. Lastly, you can use $3000 of any capital losses to offset your ordinary income (wages, self-employment, etc.).  

Keep in mind, you are just deferring the tax liability because you reinvest the tax savings and having that savings compound over time. But you can avoid the recognition on that gain as well.

3. Bequest Your Investment Account: One last advantage of a taxable account is your heirs receive a step up in basis when you die. As I said before, any difference between what you bought the investment for and what you sold it for is considered taxable gain. However, if you still hold the account when you die, your heirs receive an increased basis to the current market value at the time of your death.  So if they sell it right away, they aren’t taxed on any gain, even the amount you received while holding the investment. No such benefit exists in tax-deferred accounts. Your heirs would pay tax at their ordinary income bracket.

You have many more consideration when investing in a taxable account. In addition, you have to balance how your taxable account fits into your entire investment portfolio. But overall, if you’re looking for a place to stash extra cash, a taxable account can be a great option.