Protecting Your Investments From Taxation by Bernard Trollet -
August 23rd, 2009
Tax free investment is purposefully rerouting taxation so that the saved resource can create benefits for the future. It can also mean creating assets so that they earn profit. Investment is an individual's option which allows an investor to place his money in property, stocks, or bonds so that they create returns over time. It is important that any returns that do accrue have to do so without depreciating the value of the investment.
As you can see, learning all the tax points, rules, tax brackets, etc. can be quite confusing. Some investments are available in the form of bonds. These are state guaranteed securities which are protected against depreciation by ensuring the capital payments modified in line with the taxation rate. This index tracks the taxation rate changes. So any modification made protects the investor's capital. These bonds don't pay a significant rate of return and therefore are not very popular. But they are a sure way of beating inflation (robien zrr). Also, if you reside in a high cost of living region, there are larger housing write-offs which means most people living in the most costly coastal areas can have really large incomes and still be in the lower tax brackets.
One might ignore the uncertainty of individual stocks by buying market index funds, as these move with the broad pattern of the investing world. This prevents the investor needing to look after a diversified set of holdings, and at the same time, allowing him to utilize the market strength. This may even be the time that allows for a visit to a CPA for an approach tailored to your circumstances, but probably only if you have a high concentration of investments in taxable accounts.
However, a note of caution is added here. Both investing and real estate are moved by speculative habits and there is always a possibility that your tax liability can be affected by very big drops in their value. There are other investment venues like real estate, art and land. They are thought of as safe inflation hedges in ordinary times. Some assets can be hard to buy or sell as a lot of extra elements are involved. CDs and the stock market are other ideas for investment that will usually beat the rate of taxation. It's important to remember, even when you are in a low tax bracket, the gain will most likely move you into a high tax bracket. I wouldn't tackle a tax approach so involved, when it comes to real estate without consulting an expert. |Investment taxes are difficult to understand. If you purchase a stock from a bank, you must pay a commission on top of the purchase price of the security. What can be hidden from you is an extra commission, which is part of the spread. The spread is the difference between the cost the brokerage firm paid for the security and the value at which it sold the security to you. Gains may still be very small, but it is nearly certain that they will beat the taxation rate. So if you are involved in real estate your investments would rise along with the tax rate. This would ensure that at no time your capital goes below the inflation rate.
This, of course, does bring up the most important issue. Taxation affects the cost of stocks. But in the long run, companies are constantly increasing their turnover and profits and therefore the worth of their investments tend to go up. When investing in real estate a lot of caution has to be exercised. Only stocks of institutions that a should be included in the portfolio. However I would not actually think about this until our investments were fully funded.
About the Author
Written by Bernard Trollet of the French web site gestiondefiscalisation.com which contains a large amount of information to help you discover more on tax shelters (investissement immobilier étranger) and investing without paying taxes.