Investments that Eliminate Tax Worries

Without investing your money, there is very little chance that you will have enough for retirement. Social Security was only ever designed to replace about 60% of your income, and very few people want to work past age 70 or so. But investing often comes with negative tax consequences; you have to figure out cost basis, pay taxes on capital gains, and worry that rebalancing will trigger a taxable event. Fortunately there are a few ways to invest and eliminate most of these tax worries. This means less work every year for your accountant in Billings, Montana, and it means fewer headaches for you to come up with the cash to pay your tax bill.

Investments in a Roth IRA

This one comes first on the list because it is the best option out there for reducing your taxes. As long as you meet the income requirements for a Roth IRA, you can put in as much as $5,500 in 2015 (this number changes periodically to compensate for inflation). You pay taxes on the money now, but then after you turn age 59.5, you can pull the money out without worrying about taxes. Any gains or rebalancing in the account are done without tax worries.

Investments in a Traditional IRA

A traditional IRA is the next best option for reducing your taxable investments. The income requirements are similar to a Roth IRA, but they are a little different. With a traditional IRA you get to deduct the contributions off of your taxes the year you contribute, you can rebalance and not worry about the gains in the account until it comes time to withdraw the money. At that time anything that comes out of the account is taxed at your current tax rate.

Investments in an Annuity

Annuities are largely underused investment vehicles today. But they do have a great number of benefits, especially for those who make too much money to invest in an IRA. Any money going into an annuity is taxable, but once inside it can grow and be rebalanced without worry. When it comes time to annuitize, or withdraw, the money, you pay taxes based on how much of the account is gains and how much was cost basis.

Investments in Government Issues

The government, both local and federal governments, issues bonds and other investment products. Money that is used to buy these investments is taxable, but then the gains are usually free from taxes. Whether or not they are taxable at the time varies by product, so it is best to talk with your accountant in Billings, Montana to determine which product is best to suit your needs.

Investments in Real Estate

This is one that is often overlooked, and usually because it takes a bit more work than investing in securities. If you buy a house, and you live in it as your primary residence for at least two years, you can fix it up and sell it for far more than you paid for it. The great thing is that you get to keep all of those gains, and not worry about paying a dime in taxes (so long as you meet the requirements). Find a Realtor in Billings, Montana that knows the market if you think this is a challenge that you want to take on.

We knows all about the tax laws surrounding investments. If you want to grow your wealth, but you don’t want to mess around with taxes and all that goes with them, then one of these investment vehicles may work well for you. We can help you decide which one is right for you.

Practical Taxes is a full service accounting firm located here in Billings, Montana. We can help with tax needs, tax preparation, business consulting, online payroll services, and much more. Give us a call at 406-894-2050 to get learn more about how we can help you.