Do you have investment income? If so, you must plan and take proactive steps in order to prevent your income tax bill from rising. If you're not sure how to accomplish this, here are three tips that investors of all shapes and sizes can put into practice.

1. Fund Retirement Accounts First

Most retirement savings methods are what is known as 'tax deferred'. Money you contribute to such accounts is not counted as taxable income in the year in which you contribute it, but rather when you withdraw it during retirement. So if you can fund these first, you avoid a hefty tax bill each year.

Since most people's income tax rate is lower when they retire (and withdraw money), you can generally expect a lifelong tax savings. A tax preparation professional can also help you determine what you can expect from your personal tax rate based on retirement plans. 

2. Choose Tax Advantaged Investments

Along with certain accounts being 'tax advantaged', individual investments can also be so. Municipal bonds, for instance, are usually free from taxation at the federal level. If you have money from a real estate transaction, you may be able to reinvest it into a like-kind exchange made up of either physical property or a real estate trust without paying taxes on the gain.

Certain investments come with a lower tax rate as well. If you hold investments for more than a year, they are generally taxed at a lower long-term rate — even as low as 0%. Shorter length investments are taxed at your normal tax rate. Choosing how to sell various assets, then, could save you money each year.

On the other hand, investments in certain 'collectible' categories are taxed at a higher rate. Talk with a tax professional before deciding how to invest in hard assets. 

3. Balance Losses and Gains

Most investments are taxed only when you realize the profit from their sale. So the timing of sales can be be a good way to actively manage your tax bill. If you sell some investments for a good profit, for instance, look for poorly-performing investments as well. Selling some 'loser' investments in the same year is known as 'harvesting your losses' and it offsets the profit made from good-performing ones. 

These three tax strategies are free to all investors, but they can be challenging for the average person. Your best way to find investment tax strategies and use them successfully is to work with an experienced tax preparation service. Make an appointment today to start benefiting from a better investment tax plan now.