If you have a lot of money and are looking for ways to reduce your tax burden, you may want to seek help from a firm that offers private wealth management. A firm like this offers financial planning tips and strategies that may help you reduce the amount of money you must pay on your wealth for taxes. Here are some of the top ways you might be able to wisely use your money to reduce your tax liability.
Invest In Real Estate
One of the best options you have for reducing your taxes is using your money to invest in real estate. Purchasing rental properties will be some work, but it can also be a great way to invest your money. By purchasing real estate, you will tie up your money in a valuable asset. You will have to claim the rental money you receive as income; however, you will inherit a lot of wonderful tax breaks.
The main tax break you will get is depreciation. Depreciation is an expense you do not actually realize, yet you have the right to deduct it on your taxes. Depreciation of a building is one of the largest tax deductions you can take on real estate, and it is generally highest during the first few years you own the building.
The end result of investing in real estate is that you may experience a paper loss, which will result in lower taxes owed. You will need to be cautious when using this option, though. You must thoroughly research any property you are considering purchasing to ensure that it can make money.
Open Traditional IRAs
Traditional IRAs are one of the best investments for reducing taxable income. While you can only contribute up to $5,500 per year into an account, this amount could reduce the amount you owe on taxes. In addition, if you are married, you might each be able to open up a traditional IRA, which means you might be able to invest double this amount.
All the money you invest in a traditional IRA can be used as a tax write-off. The amount will reduce your taxable income, which will in turn result in lower income taxes.
You might also want to talk to your financial planner about using a Roth IRA. This is a different type of IRA, but there might be some benefits to having one of these too. The main difference with a Roth IRA is that you cannot write off your contributions to the account. You will pay taxes on the money you invest; however, you will not pay taxes on the distributions from the account.
Purchase Government Bonds
Another option you have for lowering your tax liability is purchasing government bonds. There are a variety of governmental organizations that issue bonds. They do this to raise money for projects, and in some cases, the income earned on the bonds is tax exempt.
If you want to pay lower taxes, you may want to consider looking for tax-exempt government bonds. With these bonds, you are lending money to the government for a certain period of time. In return, the government agrees to pay you a certain interest rate on the bonds, and they also offer tax exemption from the interest you earn.
While you will not make a ton of money on the interest, you will be earning some, and the money you earn will all be tax-free money.
There are numerous strategies you can use to lower your tax liability, and you can learn more about this by making an appointment with a financial planner at a private wealth management firm.