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5 Tax Tips For Investors
Making investments is a great way to both
plan for your future and build your personal wealth now. With
the right stock management, investments have allowed many people
to quit their day jobs and follow their dreams. But one thing
that scares some potential investors away is the complexity
of tax laws surrounding investments and the fear of getting
smacked in the face with mega-bill from Uncle Sam when tax
time rolls around. Well, fear not. Give these five savvy tax
tricks a try to help you get the most out of your investments
by giving the IRS the least you possibly can.
Tax
investment tip number one is to invest in municipal bonds. Municipal bonds are your way of investing in the government
and improving their cash flow, so you are rewarded by not having
to pay taxes on any profits you receive from municipals bonds
on your local, state, or federal taxes. Unlike most investments
opportunities, this municipal bond tax break is holds true
for any amount of income received from the bonds, and it is
good for people in any tax brackets. Likewise, while municipal
bonds may not burn up the stock market like some other big
money stocks, you have a stable, slow growing, long-term investment
you can count on.
Tax tip number two shares a lot in common with tax tip number
one, in that the tax free benefits are a way to say thanks
for investing in the government - buy US Savings Bonds. There
are a few more restrictions here than with municipal bonds,
but as long as the bonds are in your name, you are single or
filing separately, or you use the bonds towards you college
education/college loan, your bond profit is 100% tax free.
For tip number three, consider
investing in a Roth IRA. While
it’s true you won’t be able to access the money you put into
the IRS for one year, after that, all withdraws by you and
all the interest accrued is tax-free. Think of it as a high
interest, tax-free savings account, which has the added benefit
of helping you maximize your retirement savings.
Tax tip number four is, overset
your investment income taxes by making a donation of stocks
to a charity of your choice. You can deduct the cost of any stocks you gift to a charity
at the price at which you purchased them, if you have held
the stocks for less than a year. Save even more money by gifting
stocks you have held for more than a year; with these stocks,
you can deduct the appreciated, fair market value of the stock
at the time of the transfer.
The fifth tax tip sounds a little obvious, but bears repeating:
dumb the losers. If tax time is rolling around, and you are
losing money on some stocks, don’t try to ride it out. Dump
the stocks and deduct your loses from your taxes as a capital
loss. If you’ve made income through some of your other investments,
this tip works especially well to offset some of those taxes.
Of course, if you have made a significant amount of money
through your investments this year, the fact is, you’re going
to have to pay at least some taxes on it. Plan for it, and
look for deductions well ahead of time. Make a few charitable
donations, take advantage of the Energy Credit Tax Act, or
do anything else to bring your tax bill down. A financial advisor
can help you identify tax breaks that are available to you.
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SolveYourProblem.com : 2007
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