During the times of inflation, it is the thought of almost everyone to know various ways of saving their few proportions of hard earned money. It is only a consumer who values the worthiness of his own hard-earned money and thus plans of several ways of investing them at right place for securing the future. Almost all of us feel the need for saving money.
So, here are some ways which we think might prove helpful in saving your money:
- Hold stocks on an annual basis: Instead of trading stocks on regular basis, hold them for a year and then sell them in bigger share market. By doing this, you would be able to claim the benefits of long term capital gains. And you can also save your taxes by 39.6%.
- Understand the rules of dividends: Do you know that the benefits pertaining to the acquisition of mutual funds are quite different from stock dividends? On getting paid dividends, one is liable to hold the stock for at least 60 days and that too after the termination of ex-dividend. On another side, if you are allowed a dividend that covers a period for more than 366 days then you are liable to hold your shares for at least 90 days during the 181-day period.
- Use losses to cover offset gains: It doesn’t matter how good investment you do but sometimes you might suffer to lose at best deals and you should also mention your losses in your portfolio. It is very fortunate of the IRS that allows investors to use a capital loss in offsetting their investment income and it also lowers their tax bill. What you generally need to do is use to use short term losses for taking short term gains and long term losses for taking long term gains.
- Use Losses to cover Limited Ordinary Income: Is it not true that your tax breaks for losses don’t stop with covering all of your capital gains for an entire year? For an assumption, you can use up to 3,000 USD of capital losses for setting off $1,500 in case of filing separation and in this way you can offset ordinary income like wages or interest income.
- Look out for wash sales: IRS has some specified rules which suggest various ways of how taxpayers like you can prevent themselves from suffering losses is simply by selling an investment and this process has been termed by them as “wash sales”. But a disadvantage associated with this is that a person during the time of he/she repurchased an investment then he is not liable for claiming any sort of losses on taxes incurred on his part.
- Use Tax-friendly FD investments: This can be the best way to invest money and save income tax as well. The interest rates are too low, i.e around 4.5% to 7.5% yearly. The Post office tax saving FD schemes offers 8% interest rates early. The interests that you receive from such FD schemes are taxable; hence the tax rebate is available on the investment and not on the returns.
- Optimize your contribution to a retirement account: By investing in tax-deferred retirement accounts like 401ks and IRAs duly offer significant tax slabs for your investment income. The most surprising thing about using a traditional or Roth IRA account lies that both of them allow taxpayer’s money to grow. This, in turn, signifies that there will be no claims of losses to be incurred by your side and every time you re-invest in them, your investment returns would be high.
- Start using HSAs for saving medical expenses: Use a smart way of saving your investment income by making contributions to the HSA accounts as very less amount of tax is deductible on your invested money and your money would go tax-free which means that you can reinvest it in nearby future.
- Life insurance options: Life insurance plan options are still among the best options of financial planning. Going for term insurance plans that can cover maximum risks with low premium is still the best option one can go for when it comes to saving taxes. This not just supports you at the time of any health crisis, but also supports your family and saves taxes.
- Carefully calculate taxable gains: Ever thought why you don’t pay taxes on the entire sale price after you sell an investment? You simply subtract your basis from a very concrete portion which is required by you to pay for the investments.
- Add trading costs while calculating gains: After calculating your basis and sale proceeds, don’t ever forget to include any trading costs like transaction fees and commissions.
- Believe in Pension Funds: If we talk about providing income after we attain retirement, pension funds are something that comes at help. There are two categories of pension funds: deferred and immediate annuity plans. In deferred annuity pension plan, you can invest till the time you retire. Later you can withdraw the money after you reach retirement up to 60% of the saved amount and reinvest the outstanding amount. In immediate annuity plans, you can invest in one time and get monthly payments from subsequent months. These 15 tips of investment can help you in very long run. You can consider these options as per your suitability, affordability, risk appetite and tenure.