24 Jul Smart Ways to Invest Tax

Did you know that 1 in every 5 Americans (in the middle tax bracket) pay about 13% in federal  taxes? But don’t let that deceive you, this average hides a big variation – some of us don’t pay anything yet others pay more than 25% in federal income tax.

The perfect tax strategy

You can reduce your overall tax by deferring and managing it. For this, you’d need to use levers. They will reduce your overall tax bill.

Defer taxes

Saving for your retirement is no mean feat. All the same, there are some accounts that offer tax incentives to help you maximize tax benefits. For example, IRAs, 401 (K) and 403 (b) are good for anybody who opts for tax deferment.

Manage taxes

Using a tax-deferred account to build your tax strategy is a smart idea but that is only part of a bigger picture. There are a number of ways you can use to manage your taxes. These are:

* Match your account with the ideal investment – invest in a venture that generates the most taxable income in an account that provides tax benefits. Stock-Index ETFs, municipal bonds should be a viable option.

* Consider an investment that generates less tax – your investment obvious have tax implications. Consult a financial advisor to help you identify an investment that generates less tax. Something like an index fund or a mutual fund (one which is tax-funded).

* Offset gains and incomes with losses

* Think about offering to charity or for a noble course.

Reduce taxes

There is no solution to evading tax (not literally because that’s a criminal offense). Instead, you have to figure out a way of reducing them. Here are some techniques for the same:

1. Go for tax-free (exempt) municipal bonds.

2. Consider a Roth IRA or just the Roth Conversion

3. Put a strategy in place.

That’s how you save and invest tax benefits.

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