Today, a guest post from my friend, Crystal.
It can be difficult to make confident financial plans when you have a family. Most of us find family life busy and challenging. Oftentimes money is in too short supply. If this is familiar to you, you may not find the time or purpose in thinking about building future wealth. After all, how would you start to make it happen?
Finding ways to avoid taxes is one of the best ways to build further wealth, especially when you have a family. Fortunately, there are a number of tax-protection methods made available by the government and various programs. By becoming aware of these and taking advantage of them, you’ll start to have more money to spend and save. This is by no means a complete list, but it’ll show you the kind of things to look for and practice.
- Life Insurance. Life insurance isn’t the first tax avoidance strategy that most people think of, but this doesn’t mean that it doesn’t have excellent potential. Whole life insurance programs may offer tax-protected investment opportunities, which can be of great service if you’ve already maxed out other plans. For term life, the death benefit of no exam life insurance policies is almost always paid out tax free. In either case, life insurance has positive tax implications, even as it provides security and peace of mind for the future.
- Using Real Estate Wisely. If you sell a home, you will have to pay a big tax bill…that is, unless you buy another house with that money right away. Another way to use a home to save on your tax bill is to write off the mortgage insurance that you’re required to have in most situations. The tax benefits of home ownership are not as juicy as they used to be, but you may be able to find some real savings when writing off renovations, home office space, some local taxes, and other areas.
- Take Advantage of Tax-Protected Investment Accounts. Roth and Traditional IRAs, 401(k) plans, and a variety of other tax-protected investment accounts are all made available by the government so that people can prepare for an independent financial future, without having to rely on the government for support down the road. People get quite sophisticated with accounts like these, finding ways to maximize the annual contribution limits far above what they may seem to be on the surface. Whether or not you go all the way like that, doing something simple like maxing out an IRA is a great place to start.
There are plenty of ways to avoid taxes legally, while using the money you’re sheltering to build a better financial future for you and your family. Pay attention to all government tax write-offs made available to parents with young children, and focus on ways to pass on your estate with minimal tax loss if you are older. In any case, becoming aware of the most efficient ways to pay and not pay taxes is one of the best ways to build wealth in the long run.