6 Tax Sheltered Investments as Part of a Strategy

Tax sheltered investments aren’t, or shouldn’t be the main force behind your investment plan.  Still, it makes sense to leverage opportunities to manage, defer or reduce taxes.  Planning is the key element in a tax efficient investment approach.  Good planning turns buy-sell timing, account choices,  realized losses exploitation, and charitable giving into a cohesive tax strategy.

Here we’ll highlight some basic tax sheltered investments. Contact your Americore Representative for specific, in depth tax sheltered investments ideas.

1. Municipal Bonds are Tax Sheltered Investments

The purchase of a municipal bond essentially is lending money to a state or local government.  There are a set number of interest payments over a preset period of time. Once the bond reaches the maturity date, the full original bond amount is repaid to the buyer.

Interest from municipal bonds is exempt from federal taxes. Depending on where you live, it may be tax exempt at the state and local levels too. Municipal bonds pay lower interest rates.  However, the tax benefits combined with lower than corporate bonds default rates make them attractive to investors.

2. Long-Term Capital Gains With Favorable Tax Rates

Long-term capital gains from investments like real estate mutual funds, offer favorable tax rates compared to short-term capital gains. Patient investors reap the rewards of preferential tax treatments  that just improved with new thresholds in 2022.   

3. Business Tax Savings

Besides deducting a percentage of the home expenses, business owners can enjoy other tax advantages.  Setting Every Community Up for Retirement Enhancement, (SECURE), was enacted in 2019 to facilitate employer participation in retirement plans.  SECURE reformed retirement savings protocols, offering incentives to employers who join multiple employer plans and offer them to their employees.

4. Max Out Tax Sheltered Retirement Accounts

According to a Northwestern Mutual 2018 study, 21 percent of Americans have NO retirement savings.  The Study also revealed a third of the nearly retirement age group have less than $25,000 in retirement savings.  In spite of these dire statistics, 75 percent of Americans believe social security won’t be able to add to their retirement. 

The government is concerned about the lack of savings.  The SECURE act was drafted to encourage employers and employees to save for retirement. It created incentives using tax sheltered investments.  Learn the current caps so you can max out your contributions. Today, RMD (required minimum distributions) aren’t mandatory until age 72, and IRA contributions now have no maximum age.   If you’re a wage earner with a 401(k) contribute as much as you can into your retirement account.  There’s an extra free money bonus if your employer matches your retirement contributions.

5. Use a Health Savings Account

If you have an Employee  insurance plan with a high deductible, a health savings account (HSA) to save enough to cover the high deductible can be valuable.  Some HAS contributions are matched by employers, so it is worth considering.  Keep in mind, withdrawals for non-medical expenses may be taxed, but withdrawals for medical expense aren’t.

6. Claim Tax Credits Available

Americore can help you find more tax credits and incentives than you thought possible.  Many people know about the earned income tax credit, and the American rescue plan.  Also familiar is the American Opportunity Tax Credit.  It offers a maximum of $2500 per year for eligible students for the first four year of higher education.  The Lifetime Learning Credit allows up to 20% credit for as much as $2000 per return climaxing at $10,000 of qualified expenses.  

Are you already saving for retirement?  Maybe the ABLE account is the right one for you. Individuals can receive a credit of up to half their contributions to a plan, like an IRA, or an ABLE account.  The Child and Dependent Care Credit, depending on income, can help offset qualified child and dependent adult care expenses.  But don’t stop there. 

Americore unique Blue Apple programs, offer favorable features to enhance small business growth and improve cash flow.  The programs are underused, mainly because other advisors have little experience with them.  Americore representatives are exceptionally familiar with every nuance of the programs.  In fact, we work with existing business advisors regularly to leverage the programs that are most valuable to their clients. 

One of the many blue apple program is the Research Tax Credit.  This Federal Research and Development Tax Credit (FRDTC) is a wage based tax reduction that rewards companies for investing in eligible research.  Sadly, many believe this credit is only for technology and pharmaceutical companies, and miss potential benefits. In reality, the FRDTC can be used by engineers, architects, manufacturers and other types of businesses that qualify. 

The key to using the programs is understanding when and how to best implement them.  For information on programs, contact your Blue Apple professional at Americore and start the conversation. You could save millions.