Tax Free Investing

Investing is the surest way to increase wealth over time. The wealthiest 10% of Americans own 89% of all US stocks (as of 10/2021). Perhaps the biggest downside to investing (other than the potential to lose money) is having to pay taxes on capital gains. Capital gains tax is levied on the profit from an investment that is incurred when the investment is sold. 


Key facts regarding capital gains tax

  1. Capital gains tax is due only after the investment is sold

  2. Capital gains taxes apply only to “capital assets,” which include stocks, bonds, jewelry, coin collections, and real estate

  3. Long-term gains are taxed at a lower rate than short-term gains.

  4. Capital gains can be offset by capital losses. Some investors sell losing investments to lower the capital gains taxes 

Like in all other facets of life, being strategic and having a plan will yield favorable results. Certain investment vehicles are not subject to capital gains tax and investments in certain tax-advantaged retirement accounts will likewise be under tax protection. As you build your portfolio, it’s imperative to take advantage of the following investment vehicles: 

  1. 401(k)  

  2. Roth IRA 

  3. Municipal bonds

  4. Health Savings Account 

  5. 529 plan (college)

Building healthy habits to invest in now pays off in dividends later. You can start investing with the above accounts for as little as $10. No matter where you are in life, the best time to start investing is right now. 

With all investments, please perform research and choose the right investment option that is best for your current/future needs.