With tax season coming up, and with certain tax reforms taking effect, there is much to consider when it comes to taxes. First and foremost, the Trump administration’s tax overhaul has created new tax brackets and changed certain limitations that impact each individual’s taxes. Though some people would like to pay little or no taxes, there is no escape from paying what is owed by law. There are, however, many strategies that could help taxpayers lower their tax bill.
Some taxpayers use different types of investments to minimize their tax bills in any given year and over time. This is legal, as long as the IRS and local tax rules are followed without crossing any lines. It is important to understand, however, that investing with the purpose of lowering one’s tax burden can come with many pitfalls.
It is imperative to consult with a tax professional ahead of making investment decisions that could affect taxes. Those tax pros should also be consulted over time to avoid overlooking any tax law changes that took effect since the decision was made.
24/7 Wall St. has reviewed the best types of investments and strategies that may help individuals lower their taxes. Again, there are often pitfalls that must be avoided to stay within the tax law guidelines. Many investment vehicles also can get very complicated, and many of the more complex strategies simply may not be available or make sense to use for most taxpayers. Other strategies are simple and can be used by almost anyone.
It is also important to understand that many tax-free investments may not be entirely free of taxes in some form or another. Many of the tax-advantaged strategies are also more tax-deferral strategies rather than truly tax-free.