Question: I know that municipal bonds should only be held in a taxable account instead of an IRA. But what else is good to put in a taxable account? I heard that foreign stocks that pay dividends should be considered to be held in taxable accounts. The reason for this, I believe, is that the tax that the foreign government takes out of your dividend can be recovered, but that if you hold the foreign stock ticker in an IRA you cannot get this this foreign tax back. Is this true? And what else is good to hold in taxable accounts?

Answer: This is a great question, says Dana Anspach, the founder and CEO of Sensible Money and author of Control Your Retirement Destiny.

The concept you're asking about, she says, is called "asset location" which is the process of strategically deciding which asset belongs in which type of account to make the overall outcome more tax-efficient.

"You are correct that holding dividend-paying foreign stocks in taxable accounts is usually preferable to holding them in an IRA," says Anspach. "When held in a taxable account, you can usually claim a tax credit for the lesser of the amount of foreign taxes paid or the U.S. tax liability on the foreign income.

When held in an IRA, there is no foreign income to report, and thus no credit to claim. However, when you own foreign stocks in an IRA the foreign taxes withheld reduce the income earned in the account; thus, it functions more like a deduction rather than a credit."

Other assets that are good to hold in taxable accounts, according to Anspach, are low-turnover mutual funds that generate their returns in the form of long-term capital gains and qualified dividends, or stocks that pay qualified dividends.

"These forms of income are taxed at a lower tax rate than short-term gains and interest income," she says. "For tax efficiency, avoid holding actively managed or high-turnover funds in taxable accounts."

Got questions about the new tax law, Social Security, Medicare, retirement, investments, or money in general? Want to be considered for a Money Makeover? Email Robert.Powell@TheStreet.com.

Question: I know that municipal bonds should only be held in a taxable account instead of an IRA. But what else is good to put in a taxable account? I heard that foreign stocks that pay dividends should be considered to be held in taxable accounts. The reason for this, I believe, is that the tax that the foreign government takes out of your dividend can be recovered, but that if you hold the foreign stock ticker in an IRA you cannot get this this foreign tax back. Is this true? And what else is good to hold in taxable accounts?

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