There’s no shortage of tax-sheltered investment accounts available to ordinary Americans looking to minimize their annual bill to the IRS.
Some of the most popular options include workplace 401(k) plans, Roth IRAs and even health savings accounts (HSAs). Depending on the account, you might benefit from upfront deductions, tax-deferred growth or even tax-free withdrawals.
But all three have one thing in common: limited contribution room and, in some cases, income-based eligibility restrictions. For investors who’ve maxed them out, the only option left is often a taxable brokerage account.
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While flexible and easy to use, taxable accounts come with a catch: Gains realized here are subject to taxes, and not at a single flat rate.
For example, returns from stocks might be taxed as dividends, which could be qualified or nonqualified, or as capital gains, which are taxed at short- or long-term rates depending on how long you hold them.
So, while asset allocation — how you divide your portfolio across stocks, bonds and other investments — still plays a key role in a taxable account, tax efficiency becomes just as important.
The same high-performing active fund that works well in a Roth IRA may run into problems in a brokerage account, where taxes can significantly reduce your net returns.
Here are five of the most tax-efficient investments available in 2025:
— Berkshire Hathaway.
— Amazon.com.
— Bitcoin.
— Municipal Bond ETFs.
— Alpha Architect 1-3 Month Box ETF.
Berkshire Hathaway
may be stepping down as CEO at year-end, but the conglomerate he built, Berkshire Hathaway Inc. (ticker: BRK.A, BRK.B), remains one of the most tax-efficient compounders on the market today.
Berkshire runs a unique flywheel model, using the insurance float generated by subsidiaries like Geico as a low-cost source of capital. That float is then deployed into wholly owned businesses like BNSF Railway and publicly traded stocks like Apple Inc. (AAPL).
This approach is incredibly difficult to replicate. Very few enterprises have had someone like Buffett and his late partner Charlie Munger at the helm. Both were disciplined insurance underwriters, world-class capital allocators and sharp stock pickers.
What makes Berkshire especially tax-efficient is its refusal to pay dividends. Buffett has long preferred to retain earnings. He believes this approach generates better long-term returns for shareholders via opportunistic buybacks and acquisitions, neither of which triggers unnecessary tax events.
“I would be surprised if Berkshire starts to pay dividends, given Buffett’s aversion to them,” says Adam Patti, CEO at VistaShares ETFs, which offers the VistaShares Target 15 Berkshire Select Income ETF (OMAH).
Buffett and his handpicked successor, Greg Abel, are likely keeping Berkshire’s $350 billion cash pile ready for a once-in-a-generation buying opportunity that Buffett once described as a deal big enough to “move the needle” at Berkshire.
“Additionally, given that they have a new CEO, my best guess is that he will likely want to put his stamp on the portfolio by using that massive cash horde to his advantage when market conditions are right,” Patti says.
Amazon.com
Founded by Jeff Bezos and currently led by Andy Jassy, Amazon.com Inc. (AMZN) is another mega-cap U.S. stock and top S&P 500 company that doesn’t pay dividends.
While similar-sized tech peers like Nvidia Corp. (NVDA), Meta Platforms Inc. (META) and Alphabet Inc. (GOOG, GOOGL) have all initiated modest dividend payments in recent years, Amazon has held off. That’s largely because Amazon has evolved far beyond its roots as an online bookstore.
While e-commerce remains a major part of its business, the company has diversified into several high-growth areas. Amazon Web Services (AWS) is a global leader in cloud infrastructure, and the company also owns significant logistics, advertising and digital streaming operations. One of the more strategic bets today is Amazon’s partnership with artificial intelligence firm Anthropic. The company has invested $4 billion in Anthropic and is serving as its primary cloud provider through AWS, deepening its stake in both AI and cloud computing.
Given the sheer number of reinvestment opportunities across Amazon’s sprawling empire, a dividend remains unlikely anytime soon. CEO Andy Jassy’s strategy continues to prioritize long-term growth over short-term payouts, using the company’s cash flow to expand into high-margin, high-potential verticals.
Bitcoin
Bitcoin, the largest cryptocurrency by market capitalization, is also one of the most tax-efficient investments available, thanks to the ability to defer taxes indefinitely.
“For an asset like Bitcoin with a promising trajectory, alternative thinkers can maximize their tax savings on those gains,” says Chris Kline, chief revenue officer and co-founder at Bitcoin IRA. Since Bitcoin doesn’t pay interest or dividends, there’s no taxable income to report unless you sell.
That’s why many Bitcoin holders, especially so-called Bitcoin maximalists, aim to hold it for as long as possible. The strategy is simple: no sale, no tax. And it’s not just individuals following this playbook. Some companies have made Bitcoin a core asset on their balance sheets.
The most notable is MicroStrategy Inc. (MSTR), which has acquired a total of 580,250 Bitcoin, largely funded through the issuance of convertible bonds.
More recently, GameStop Corp. (GME) CEO Ryan Cohen made headlines in May by using proceeds from shareholder dilution to purchase 4,710 Bitcoin after slashing operations.
While tax-efficient, investing in Bitcoin comes with high volatility. Since December 2014, Bitcoin has delivered a stellar 71.2% annualized return, but investors had to stomach historical drawdowns of up to 83.2%, with average yearly price swings of roughly 73% in either direction.
Municipal Bond ETFs
Investors looking for safety while maintaining tax efficiency should think twice before picking up a regular bond exchange-traded fund (ETF). That’s because most broad “aggregate” bond ETFs hold a mix of U.S. Treasury bonds and investment-grade corporate bonds.
While Treasury income is exempt from state taxes, corporate bond interest is fully taxable at both the state and federal level. For high-income earners, that can erode after-tax returns significantly.
To help mitigate this, consider using a tax-exempt bond ETF that holds bonds issued by states and municipal entities. Some of these ETFs are nationally diversified, paying interest exempt from federal income tax, and in many cases, from the alternative minimum tax as well.
“The Vanguard Core Tax-Exempt ETF (VCRM) is actively managed by Vanguard’s unparalleled municipal team with nearly five decades of proven expertise,” explains Rebecca Venter, senior fixed-income product manager at Vanguard. “This intermediate-duration, all-curve ETF offers broad diversification and the strategic flexibility to invest in below-investment-grade bonds.”
Other municipal bond ETFs are state-specific, which can offer even more tax relief. If you reside in the same state the bonds are issued from, you’re typically exempt from state tax, too. This is especially valuable for residents of high-tax states like New York or California.
“The Vanguard California Tax-Exempt Bond ETF (VTEC) is the ideal choice for tax-sensitive California residents with an intermediate-term investment horizon,” Venter explains. “With an expense ratio of just 0.08%, VTEC provides a low-cost option for investors to gain diversified California municipal exposure.”
At first glance, the 30-day SEC yield on municipal bond ETFs might seem underwhelming. But that’s not an apples-to-apples comparison. What you really want to calculate is the “tax-equivalent yield,” which tells you how much a fully taxable bond fund would have to yield to match the after-tax income of a municipal bond ETF.
Alpha Architect 1-3 Month Box ETF
Municipal bond ETFs are generally safer than stocks, but they still come with risks. While most carry excellent credit ratings and a low risk of default, they are sensitive to interest rates. When rates rise, the prices of these ETFs, especially those with intermediate or long durations, can fall.
For more price stability and a tax-efficient cash management option, one unique ETF to consider is the Alpha Architect 1-3 Month Box ETF (BOXX).
BOXX aims to replicate the total returns of a rolling 1-to-3-month Treasury ladder, but without holding any actual Treasurys and paying regular interest.
Instead, it uses a complex, multi-leg options strategy called a box spread, which involves simultaneously buying and selling calls and puts at different strike prices to create a low-risk, fixed payout at expiration.
Right now, that equates to about a 4.4% average yield to expiration, right in line with the 4.25% to 4.5% federal funds target range.
That said, the strategy doesn’t guarantee that the ETF won’t ever distribute income. In August 2024, BOXX made a one-time capital gains distribution, composed of both short- and long-term gains, but that hasn’t happened again since.
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5 Most Tax-Efficient Investments originally appeared on usnews.com
