These days, everyone is looking for tax-free investments in Frisco TX, because no one wants to pay taxes. Benjamin Franklin once said, “…in this world nothing can be said to be certain, except death and taxes.” While there’s no way around death, there is a way around paying taxes on certain types of investments. If you are thinking about investing your money but you don’t want to have to deal with the certainty of paying taxes, at least not right now, there are a variety of tax-deferred and tax-free investments you should consider:
1 – Retirement Investments
Putting money into traditional retirement accounts like IRAs and 401(k)s means the money you invest won’t be taxed; however, when you retire, the money you draw out will be taxed at ordinary income tax rates. Another option is Roth IRAs and employer savings plans. With these, contributions are not tax-deductible but distributions after you retire are generally tax-free. If you are a small business owner, you should consider a SEP IRA. Like other traditional IRAs, contributions are tax-deductible and you will only be taxed when you withdraw money upon retirement.
2 – Fixed Annuities
Fixed annuities are one of the more complicated tax-free investments in Frisco TX. They are essentially CD-like investments issued by insurance companies and, like CDs, they pay a guaranteed rate of interest. The interest they pay is tax-free until you begin withdrawing the money and the insurance company guarantees both the principal and the earnings.
3 – Life Insurance
Whether for yourself or for someone else, life insurance is a good investment because all monies received from insurance are tax-free, regardless of the amount. This is a good way to ensure that your loved ones will be taken care of financially and will not have to worry about taxes on that money after your passing.
4 – Municipal Bonds
Investing in municipal bonds is a popular way to gain a tax advantage because interest earned is tax-free at the federal level and at many state levels, too. The downsides are that returns on municipal bonds aren’t usually very high and municipalities sometimes go bankrupt, making bonds worthless.
5 – Gifts
If you want to give money to your child or grandchild, you can open a custodial account under the Uniform Gift to Minors Act. The first $1000 of unearned income put into a child’s UGMA account is tax-exempt. The second $1000 is taxed at the children’s rate, which is about 10%. Everything over $2000 is taxed at the higher of the children’s or parent’s rate.
6 – College Investment
There are a variety of college savings instruments including the Coverdell Education Savings Account (ESA). With the ESA, you can set aside up to $2000 annually and though you won’t get to deduct this money at tax time, when the money is withdrawn to be used for your child’s education, it’s tax-free. Another instrument is a 529 plan. Many states, including Texas, have set up 529 plans to allow parents to save for their child’s college education. While contributions are not tax-deductible, the earnings, if used solely for education expenses, are tax-free.
If you are interested in learning more about tax-free investments in Frisco TX then call Jason Graziani at (972) 992-1920. I can help you to understand all of your options when it comes to tax-free and tax-deferred investments. To find out more about how I can help you with your personal finances, visit me online at www.jasongraziani.com.
Tax free investments Frisco TX
15150 Preston Road, Suite 300
Dallas, Texas 75248
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