3 Tax Investments that I can make AFTER 12/31?
Tax Investements,Let us consider that you have some idle cash lying in your bank account. Where would you invest them, so as to get tax benefits and make the most of the money? With so many options out there, it can be a bit overwhelming.
Of course, you can go on a trip or buy something new for the house. But would it be the ideal way to utilize your funds? Certainly not. To make matters easier for you, we have come up with a list of smart tax investments that you can make post 31st of December.
The HSA or Health Savings Account is a good way to park any additional cash that you might have in your possession. Here are some of the crucial details.
- The IRA allows you to park about $10,000 per year in HSA.
- The HSA account is available for families that have health plans with high deductibles.
- Your investment amount sits in the HSA account and grows until you decide to withdraw the money.
- You can withdraw the HSA found once you reach the age of 65 without any penalties, thus allowing you to even use the funds for retirement.
- The contributions that you make towards HSA can be deducted for taxes.
- The money in the account grows tax-free and so is the withdrawal.
A lot of individuals qualify for Roth IRA but do not utilize the available option. Roth IRA is a great investment option for the following reasons.
- You can contribute as much as $6,000 per year or $7,000 if you are above 50 years old.
- The investments in Roth IRA are post-tax dollars.
- The money grows tax-free in Roth IRA.
- When you withdraw the money in retirement, it is tax-free since you would have already paid taxes on the contributions made.
- There are certain earning thresholds which bar individuals to invest in Roth IRA directly. For example, the phaseout for Roth IRA for 2019 begins at $122,000 for single taxpayers and $193,000 for married filing jointly.
- Importantly, you can continue investing in both Roth IRA and 401(k).
Investments in traditional IRA is similar to that of Roth IRA baring some differences. In the end, it is your personal preference when it comes to choosing which IRA is better. The following details should help you choose better.
- You can contribute $5,000 per year into the traditional IRA.
- Claiming traditional IRA will bring down your adjusted gross income and thus your tax liability.
- The contributions can grow tax-deferred and you can even withdraw the funds without paying any taxes if they are done a bit late.
- You can set up a traditional IRA, even if you have another retirement plan in place.
- You have the option to pass on the assets to beneficiaries after death.
- The age limit for contributing to the traditional IRA is 70 1/2 years.
- While everyone can open a traditional IRA, the tax deductions vary. Single taxpayers who already have an employer-based retirement plan and earn $56,000 or less are eligible for a full deduction. Married filing jointly status individuals have a similar threshold of $89,000.
These investment options let you save money in the form of taxes and yet allow your assets to grow over time. In the year 2017, HSA grew by $8.3 Billion. In numbers perspective that is about 22% year on year growth. You can also invest and let your corpus grow.