Avoid Paying Taxes on Cash in 2024 — 3 Places To Hide It
Written by
Adam Palasciano
Edited by
Daria Uhlig
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Taxes are a part of life, and everyone has to pay them. However, in an uncertain economy, some are looking for smart places to put their cash while also reducing their taxes.
Although investors have pumped cash into money market funds amid rising interest rates, as CNBC reported, it’s important to remember that you’ll owe taxes ranging from 20% to 37% on your gains. Even a money market savings account generates taxable interest. So before you pour your cash into an account that increases your tax bill, consider investments that produce tax-free gains or provide a deduction for your contributions.
Investments That Can Save You on Taxes in 2024
Here are several investments that can save you from owing higher taxes in 2024:
Treasury Bills: Otherwise known as T-bills, these are government-backed Treasury bonds with terms ranging from one month to one year. As of Dec. 4, T-bills are yielding over 5%. One benefit that T-bills have compared with other conservative investments is that earnings are not subject to state or local taxes.
Municipal Money Market Funds: Municipal money market funds invest in assets such as bonds that are issued by state and local governments. Some of the highest paying municipal money market funds are yielding around 3.5% as of Dec. 4, and the yields are usually exempt from federal income tax.
Your 401(k) or IRA: Individual retirement account and 401(k) contributions are tax-deductible up to certain limits, and your money grows tax-free until you withdraw it in retirement. While you can’t make a lump-sum contribution to your 401(k) like you can an IRA, you can increase your payroll deferrals to take advantage of the tax savings. What’s more, you might be eligible for the savers tax credit of 10% to 50% of your retirement-account contributions, according to the IRS.
Employing smart investing strategies like government-backed bills, tax-exempt funds or tax-deferred accounts, you can plan your finances now to legally reduce your tax bill during the 2024 tax season. As always, investing doesn’t come without risk. Always be sure you assess your risk tolerance before making any investment decisions.
More From GOBankingRates
