Two Overlooked Tax Strategies That Provide Tax Benefits For Your Investments


[...] First at bat is a HSA or Health Savings Account, which provides a triple-tax benefit: pre-tax contributions, tax-free earnings and tax-free withdrawals. A HSA allows you to set aside money on a pre-tax basis and even earn interest tax-fee to pay for medical expenses. Although not available for everyone, it should be considered as one looks for health insurance annually. To be eligible, you must have a qualified health insurance plan that has a $1,350 deductible for an individual or $2,750 for a family.

In 2018, you can contribute up to $3,450 as an individual or $6,900 for a family and for HSA holders over 55 you can contribute an additional $1,000 to your account. The added benefit is that if you don’t need the money for medical reasons, but desire more retirement income, you can transfer it to your retirement accounts in the future, tax-free. I am confident that everyone will have some medical costs in retirement, so why not pay for them with pre-tax, tax-free money.

If you can’t hit a triple with a HSA, everyone can get a double with a “backdoor” Roth IRA strategy. Roth IRA’s have after-tax contributions and tax-free earnings as well as no required minimum distributions after age 70½. But, if your income is above $135,000 as an individual or $199,000 for a married couple you are phased out and can’t contribute anymore. However, there is no contribution cap for an after-tax contribution to a traditional IRA or for one to convert that money to a Roth IRA.

So if you have money to contribute to a Roth IRA, but the rules are getting in your way, you can contribute the maximum to a non-deductible IRA and then convert it to a Roth IRA. Two steps, but well worth the double tax benefits in the long-run. Continue Reading Here