Here are ways to reduce taxes on your savings interest this year

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Here are ways to reduce taxes on your savings interest this year

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The first question someone should ask is how much cash do they still need and whether it makes sense to invest some of that money elsewhere, according to CFP Ashton Lawrence, director at Mariner Wealth Advisors in Greenville, South Carolina.

Typically, financial experts recommend keeping an emergency fund of three to six months to apply to living expenses. But the amount could be higher depending on your needs or short-term goals, experts say.

For those ready to explore tax-friendly investments for cash allocations, here are some options to consider.

‘One of the best options’ for cash

If you’re a higher earner, you may consider

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There are no federal taxes on interest accrued on these assets and you could even avoid state and local levies, depending on where you live. But muni bond interest can trigger higher Medicare Part B premiums, experts warn.

A muni bond exchange-traded fund is “one of the best options available” for tax-advantaged cash, said CFP Andrew Herzog, an associate wealth advisor at The Watchman Group in Plano, Texas.

Muni bond fund yields can be lower than their taxable counterparts. But you need to calculate the after-tax yield on fully taxable funds for an apples-to-apples comparison.

Save in ‘high-income tax states’

Another option for cash is

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While you’ll still owe federal taxes on T-bill income, the assets are exempt from state and local taxes.

“This really matters in high-income tax states like California, New York and others,” Scanlon said. But there’s no benefit in places like Florida or Texas with no state income tax.

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Internal Revenue Service,National taxes,Personal finance,Government taxation and revenue,Tax planning,Personal saving,Wealth,Financial planners,Financial Advisors,Financial planning,business news
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