Posted by Fred Lake

The 7 Best Tax-Free Investments

The 7 Best Tax-Free Investments

When this comes to investments and taxes then all of us have heard that old saying: “It isn’t what you make, it is what you keep.” From the foundation of America, in case not before, the investors have found many ways in order to keep the after-tax money as much as possible.

The tax-efficient and tax-free investments are around for many years. Few of us still remember having the savings bonds as the childhood birthday gift. They were given with an explanation that the value will increase and it would be tax-free when we will be grownups. 

1. The Retirement

Among the most familiar and famous retirement accounts is the workplace 401(k) and the traditional IRAs. They’ve been around for few years. The money that is put into the traditional IRA isn’t taxed at all until this is taken out at the retirement.

2. The Fixed Annuities

The fixed annuity is generally a contract between the insurance company and you. You give the lump sum to an insurance company in an exchange for the periodic payments. A lump sum is paid at the guaranteed rate of interest and it is for a specific time period. According to Prudential, on the top of the guaranteed income and principal safety, the fixed annuities taxed-deferred growth, provide steady.

Though, the fixed annuities could be quite complicated. They’ve now come under the public scrutiny in current years because of the performance issues. The fixed annuities get regulated by through the securities might differ. It depends on the place you live. And, several annuities provide various securities. Some might get the cost-of-living adjustments. And others provide security from the company failure. There’re annuities that are with high rates of commission, whereas others offer guarantee payments to the surviving spouse.

3. Death Benefits for the Living

The life insurance or death benefits might have tax benefits. In case you get the inheritance or in case you get the money from the life insurance policy as a beneficiary of the policy. Then, this is complete without any tax. Also, the corporations don’t pay the taxes on these kinds of monies. There are many people who do not know that the corporations get the life insurance policy on the key employees. Also, the corporation receives money tax-free if they die.

When this comes to the life insurance then people who pay for the insurance might get some deduction in case they are using a policy in the business. Hence when you are running your business then you might deduct the life insurance premium.

4. The Municipal Bonds

There is another very famous way to get the tax benefits is to invest in the municipal bonds. The lending money to the state or city could give you an advantage you too. The interest from the municipal bonds is tax-free at a federal level. And, thus it might be tax-free in the local municipality and the state.

5. The Harvesting Tax Losses

You can use the downturns in the investment portfolio in order to offset the realized gains. For instance, when you going to sell the stocks A as well as B at the losses but the stocks C as well as D for the gain. You might harvest a loss from A as well as B in order to offset the income that you are about to need to pay from C as well as D stock.

6. The Gifts

When you try to save the money for the child or your grandchild then you actually know the Uniform Gift to Minors Act. 

Also, there’s so-called kiddie tax. This kiddie tax is imposed on the minors who are under 18 (and full-time students who are 24 years old and under). They are about 2,000 dollars in the investment income. This is for keeping the parents as well as others to shelter the money in their children’s accounts at the low tax rate. 

7. The College Investing

There’re a so many college saving instruments that are tax-efficient. There are contributions to the Coverdell Education Savings Account (ESA) which aren’t deductible. And the Internal Revenue Service has revealed that they might grow without any tax until it is withdrawn. The ESA permits you to put aside 2,000 dollars yearly. 


Fred Lake
Contact This Member