As its title implies, liberation from income or capital gains tax liability is the chief advantage of tax free investing. Tax free investments currently exist in many forms. Following is an overview of speculation without taxation when considering what to invest in.
Is it illegal?
Legitimate tax free investing is totally legal. Many find it incredulous that Uncle Sam would forego his usual cut of all personal income. As one might suspect, old Unc has ulterior motives for such apparent generosity. In this instance, his overriding concern is private investor inducement to promote the public interest. Even cursory analysis of the matter makes this hidden economic agenda patently obvious.
Municipal Bonds
Also called munis for short, these tax free investments are essentially promises to repay invested principal and a guaranteed yield by some future date. Fund raising for projects like new public facility construction is the primary purpose for issuing municipal bonds. Because the bonds are issued by municipalities, associated investment risks are quite low. Nominal rates of return are also relatively low. Tax-free interest accumulation may offset this disadvantage, however.
Roth IRA
Designed with retirement planning in mind, Roth IRAs are excellent tax-free investing tools. In addition to tax free interest accumulation, account owners enjoy tax exemption for any subsequent withdrawals, provided they satisfy all pertinent conditions. Eligibility to establish Roth IRAs is subject to certain income and annual contribution limitations. In most cases, premature withdrawals are subject to taxation.
Savings Bonds
These tax free investing instruments function in a fashion identical to that of their municipal counterparts discussed above – with one big exception. These bonds are issued by the US Dept. of Treasury rather than smaller local governments. In
exchange for helping build and maintain our nation’s infrastructure, investors enjoy tax exemption from interest earned on lent funds. Like all good things, this benefit eventually comes to an end, however. Cashing in a savings bond
triggers immediate tax liability on all interest earnings. Using the proceeds for higher educational expenses is the only exception to this rule. Thus US Savings Bonds are a popular means of paying for children’s college costs with tax-free funds.
Variable Universal Life Insurance
Like their whole life analogues, universal life policies accumulate cash reserves. Flexibility is the primary benefit of universal life insurance tax free investing. Not only may you choose specific investment vehicle(s), but no tax liability attaches to interest earnings. Policyholders may even borrow against accumulated cash reserves without tax liability. Borrowed funds may be used in any manner you desire.
Tax Free investing all adds up to a tremendous advantage
As the foregoing discussion illustrates, tax free investing helps advance many valuable societal interests such as education, comfortable retirements, and national security. In fact, absent the availability to grow one’s money without incurring a substantial obligation to the public purse would render most such investments infeasible for individual investors. A major private advantage is the increased effective investment yields that freedom from tax liability affords for individual speculators. Partake of the best of both pecuniary worlds by starting your own tax free investment campaign today.