Gannon: Save $$$ In Taxes - Buy Municipal Bonds

As tax season approaches, Neil Gannon of the Gannon Group suggests placing your money in municipal bonds to stave off big tax bites into your earnings.

Gannon recommends that high-net worth investors take their capital and invest it in muncipal bonds instead of stocks to protect themselves from headache-inducing tax bills at the end of the year. Residents of California, Oregon, New Jersey, and New York could be particularly hard hit, with up to 55% of dividends going to Uncle Sam.

He recommends high-grade muncipal bonds because they are "impervious" to any expected tax increases this year. Plus, they are very secure and supply a source of income that, once taxes are factored in, isn't much lower than the expected return in the S&P 500.

This advice is especially applicable if taxes on short-term and long-term capital gains are raised this year, as some investors fear.