People often think that if they invest they will face heavy tax consequences if they profit from their investments. In reality, there are ways to invest which do not necessarily involve such harsh tax consequences. In point of fact, it is possible to invest and also simultaneously reduce or eliminate your overall tax burden. It is important to use the correct methods so as to minimize your tax liability and avoid tax evasion charges.
You can build wealth without owing huge amounts in taxes. Capital gains taxes do not apply to investments until they are sold, so if you never sell them, you pay no taxes. Keep in mind though, if you receive dividends, those are taxable.
Use the Home You Own
Married couples can shelter as much as one half million dollars of a qualifying residence as long as the home has been owned by the couple for at least 2 of the previous 5 years. The two years of required residency does not have to be consecutive, you just need to reside in the home for 730 out of 1,826 days.
Roth Individual Retirement Account
When investors make withdrawals on-time using Roth IRAs, there are no taxes associated with the withdrawals. If you take money early, or even late, you can be penalized for it. The withdrawals should be correlative to your circumstances and should make sense. These funds can always sit in a savings account for a rainy day.
Work with your investment planner and financial advisor to make sure that you are taking the right steps. Making paying taxes optional must be done legally to avoid audit, jail time and an insurmountable tax liability later in life.
Image credit: Mark Moz