Here’s where to invest your cash to save on taxes in 2024

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If you’ve poured cash into money market mutual funds, you could see a higher 2023 tax bill in April. But other investments could reduce your 2024 taxes, experts say.

Investors and institutions have funneled cash into money market funds amid rising interest rates, and balances reached $5.84 trillion as of Nov. 29, the Investment Company Institute reported. Meanwhile, some of the largest money market funds are now paying close to 5.5%, as of Dec. 4, according to Crane Data.

Money market fund yields are higher than any year since the Great Recession, said certified financial planner Seth Mullikin, founder of Lattice Financial in Charlotte, North Carolina. “For most investors, this will be taxable income,” he said.

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Investors typically owe regular income taxes on earnings from money market mutual funds or high-yield savings accounts, with top marginal rates of 37% for assets held in a brokerage account. By comparison, the highest long-term capital gains rate is 20%.

Plus, boosting your income can have other financial consequences, such as higher premiums for Medicare Part B and D, known as the income-related monthly adjustment amount, or IRMAA, Mullikin said.

“While any additional income earned from higher yields is taxed at a progressively higher rate, IRMAA applies as a surcharge,” he said. “This means that even $1 of additional income could trigger higher premiums.”

However, other investment options could help minimize the tax burden, financial experts say.

Tax-friendly options for cash

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