5 Ways To Invest Without Paying High Taxes

No matter where you are in your life, it’s always a good idea to save your money; better yet, to invest it. The sooner you start the better because your money will have more time to “season” and to grow. You want your money to work for you so you don’t have to spend every waking minute of your life working or thinking about money. You have already made the smart choice of gaining a career, but even if you land a great-paying job that you love, you need to know how to handle your money wisely or you’ll always be broke or scraping by.

One of the best things that you can do in life is to invest your money. There are a number of ways to do this, and there are many different opportunities to make your money work for you. One of the best ways is to invest your money the tax-free way. One of the main reasons why a tax free investment is a good thing is that you will be able to stay in a lower income bracket which ultimately means that you will be paying less in taxes. There may be more tax-free opportunities than you may think.

Municipal Bonds

Municipal bonds are an easy way to get a tax advantage. With this type of investment, you are actually lending money to your state or city, and the interest that your bonds earn is all tax-free. You may want to double check that it is indeed free for your specific state and municipality, but it’ll be tax-free as far as federal goes. You shouldn’t expect your return to be high with this type of investment, but it’s a way to make some passive income.

Invest In An IRA

You can always invest in an IRA account without capital gains tax to worry about, and you can continue to make contributions to your account without losing any along the way. Just be sure to pay attention to any income limits so that you can make the most out of your account and your savings. There are a couple of different IRA accounts. One allows you to gain a tax deduction on your money, but you’ll pay tax when you withdraw your money. This is considered to be a “traditional” IRA account. A Roth account means that you won’t have an immediate tax deduction, but you can withdraw your money tax-free.

Gifting

When you give money to your child or other loved one, also known as “gifting,” your first $1,000 is tax-exempt and you have a limit of $14,000 per person every year.

Reap The Benefits Of An HSA

If you’re lucky enough to have an HSA, also known as a Health Savings Account, you can enjoy perks such as contributing and paying for medical bills completely tax-free. An HSA account can also be a very effective retirement account as well. You can build your savings for many years, and you can use the money that you don’t use for medical expenses for retirement savings. The only downside is that you do have to be on a high deductible health plan in order to qualify for this type of savings plan. This type of savings plan can save you as much as 25% on your medical costs.

Charity With Benefits

You could always donate stock to your favorite charity (tax-free) and then get a tax deduction for the same amount. That way, you don’t have to pay any capital gains tax for the profit that you made on your initial investment.

No matter what you decide to invest in, you want to make sure that you get a maximum gain for what you are investing. Stay informed. If you are ever unsure, you should consult with your CPA. They will know all the ins and outs or the tax rules that are always changing. If you plan ahead and you are careful with your money, you will be able to do what you love and not have to stress about money as much, if at all. Everybody has to pay taxes, but there are ways to get around paying as many taxes. You just need to make smart investments.