Even though every American citizen can take advantage of investing tax free, many of the people who actually do so are few. This is because the most benefit goes to those who are in state and federal tax brackets that are high. Some investments that are tax free include many of the investment accounts that are government sponsored. These include municipal bonds and treasury bonds. As stated before, there are ways that every American citizen can learn how to make investments that are not taxable and gain a large profit margin.
The first way to begin investing tax free is to invest in an IRA or individual retirement account. Also, you can invest in a 401k in addition to the IRA. The best part about this type of investment is that your money will appreciate, or grow and you can never be taxed on it. Also, the amount that you contribute to the account will not be taxed at the end of the year. Many times, employers will match dollar for dollar up to a certain amount when you invest in a retirement fund. However, you must leave the money in the account until you are 59.5 years old or you will incur a penalty of 10%.
Another way to begin investing in this way is to give to non-profit organizations and charities. You can do this through donations. When you keep receipts from all donations and the organization is lawful, you can reap the rewards of giving. However, keep in mind that this will not be profitable for you in the sense of having a monetary return. Yet, you will be providing a way for the charity you are supporting to meet their needs. And, of course, you will be giving with the benefits of your gift being tax free.
Finally, a way of investing this way too is to contribute to the education plan that is set up by the state that you live in. This means that, like the IRA, your contributions will not be taxed and the profits will not be taxed either. However, like the IRA, you cannot remove the money for anything other than playing for education. If you do, you will have a 10% penalty incurred on you. Yet, the money does not have to be used for your personal education. You can use it for your child’s as well. Of course, there are other ways to invest this way, make sure you research all of your options before choosing one.