Glossary
Asset location
Definition
Asset location is placing investments in the account type where they're taxed most favorably: tax-inefficient assets such as bonds and REITs in tax-deferred accounts, and tax-efficient assets such as broad index funds in taxable accounts. It can raise after-tax returns without changing the overall allocation.
How asset location works
It differs from asset allocation, which is the overall mix. Location decides where each piece of that mix sits.
Municipal bonds belong in taxable accounts; REIT income loses its Section 199A benefit inside IRAs.
Why it matters to a firm
It's a natural CPA–adviser collaboration with measurable after-tax value.
Calculators that use asset location
Questions about asset location
Is asset location the same as allocation?
No.
Where should munis go?
In taxable accounts.
Does it work with one account?
No, it needs multiple account types.
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Related terms: Tax-deferred · Tax-equivalent yield · Section 199A deduction
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