The Top Five Tax-Free Investments

And today, we’re going to talk about the top five tax-free investments. It’s not what you think, it’s going to be a little bit different than what a lot of folks are out there talking because, well, I’m a tax attorney and I look at things differently. So number one, let’s just say that we’re going to do five. We’re going to do number one is, the easiest way to have a tax-free investment is never take distributions from the investment.

Number One: Never Take Distributions From the Investment
If you never take distributions or money out of the investment, then technically you’re not taxable on it. So that’s number one, is just don’t touch it. Now, that’s not really practical for a lot of people because they’re like well wait a second Mike, I need the money. I get it, so that leads us to number two which is still kind of related to number one.

Number Two: reinvest all gains and dividends
If you have an investment and it grows let’s say in a brokerage account and you have $100,000 and it becomes $110,000 because the market went up 10% that year wonderful. You don’t have to pay taxes on that $10,000 as long as you don’t take the money out. So what a lot of people will do is they’ll reinvest that back into buying more shares of stock or whatever it is that they’re investing in and as long as you don’t take the money out – no taxes. Now eventually when you do sell the investment hopefully at a much higher value then when you purchased it – you will pay taxes but we have some great rate – long-term capital gains rates if held for over a year – 20%, 15%, 0% depending on your income.

Number Three:Roth IRA
Roth IRAs are amazing because everything goes in after-tax but once it’s in there it can grow completely tax-free and then when you retire and you start taking distributions out at retirement age – 59 1/2 plus – those distributions come out 100% tax-free for both federal and state in most cases.

Number Four: Health Savings Account
A health savings account or HSA is available if you have a high deductible health plan so think about $1,400 or more for an individual or $2,800 for a family per year deductible. If you have one of those type of plans – high deductible health plans – then you can put money into an HSA every single year tax-deductible going in comes out tax-free as long as you use it for qualified medical expenses which are pretty much anything related to healthcare including dental and vision even over-the-counter drugs now too so HSAs are awesome especially if your employer has one where they make contributions on your behalf.”

As you can see, there are several options available for investors who are looking to keep more of their money by investing in tax-free opportunities. While some of these options require patience or discipline, they can be well worth it in the long run! Which of these options appeals to you the most? Have you already taken advantage of any of them? Let us know in the comments below!