249 Broad Street Montoursville, PA 17754

How to Pay Less Tax and Make Wiser Insurance Investments

Learn How to Invest Funds Tax-Free with Kent A. Bennett Associates Inc.

Wondering how to pay less tax and make wiser insurance investments? You’re in luck… that’s our blog topic this month! When you invest money, it works for you and provides for your future. If you’re new to investing or want to diversify and pursue tax-free options, Kent A. Bennett Associates Inc. can help. You can pay less tax and make wiser insurance investments by:

  • Opting to donate to charity some appreciated securities
  • Investing in municipal bonds or a Roth IRA
  • Having a permanent life insurance policy

Donate to Charity Some Appreciated Securities as Tax-Free Investments

When you opt to donate to charity funds like appreciated securities, you can reduce taxes. Securities held for over a year before they’re sold are taxed at federal rate of 23.8% as long-term gains or losses. You very well could eliminate capital gains taxes when you donate to charity any long-term appreciated stocks, mutual funds, or cryptocurrency. At the very least, you’re entitled to a fair market value tax deduction. Another tax-free way you can donate to charity is donating funds to a donor-advised fund. You can also donate to charity a non-publicly traded asset that has unrealized long-term capital gains.

Municipal Bonds and Roth IRAs are Both Tax-Free Investment Options

Municipal bonds are typically exempt from federal taxes, making them a tax-free investment option. Usually issued by local governments, municipal bonds fund various projects—like building schools or improving infrastructure. Sometimes municipal bond interest earnings are tax exempt at state or local tax levels, but they’re always federally tax exempt. A Roth IRA is a retirement account for tax-free investing. You contribute post-tax money to a Roth IRA. When you turn age 59½, you can begin withdrawing the tax-free money from the Roth IRA.

Permanent Life Insurance is a Wise Insurance Investment & “Tax-Free”

Like we mentioned in our June 2022 blog, permanent life insurance—aka whole life insurance—includes an investment component. This investment element is called a cash-value account, which is tax-deferred (basically tax-free for a time.) A portion of your permanent life insurance premium goes into the cash-value account. This tax-free money accumulates a “cash value” over time against which you can borrow. You can also potentially withdraw funds from the cash value account, but then they’re no longer tax-free

For more information about insurance, call Kent A. Bennett Associates Inc. at (800) 548-9119. Follow us on Facebook for updates. We are happy to discuss more about how to pay less tax and make wiser insurance investments.