A Taxing Investment
April 15 - The most dreaded day of the year is right around the corner. Are you ready? Some of the most neglected (and misunderstood) tax issues are those related to your investments. If you invest with taxes in mind, you can avoid a nasty surprise when Uncle Sam comes to collect.
The tax advisors are chiming in left and right on this issue. They say that you should limit yourself - and your investments - in order to minimize your tax burden for the immediate future. Those in the high tax brackets should go mainly for retirement accounts (as in tax deferred investments) and tax free investments, and those in the lower brackets should feel free to invest as they see fit. I'm sorry, but I don't necessarily agree with their synopsis.
Dividends, interest, and short term capital gains from your investments are all taxable at your standard income tax rate. Long term capital gains (that is - those coming from investments that you have held for over a year) are taxable at a lower rate. It would make sense then, for someone in a higher bracket (and thus paying a larger percentage of his or her dollar to the government) to focus primarily on limiting these types of income, and for those in lower brackets to go crazy with them, since they're not losing as much money.
Tax deferred retirement accounts, such as your IRA, 401k, or other retirement account, allow you to contribute a specific amount of money each year to your retirement. This amount is deductible from your income. That's not to say that these retirement accounts are tax free - far from it. These accounts are tax deferred, which means that you do pay taxes, though not until you take the money out. This offers the advantage of reinvesting your yields before taxes, which if done well can end up making you more money, but the fact remains that when you do access those accounts, the going tax rate may be less favorable than it is today.
Tax free investments do exist - to some extent. Municipal bonds and certain money market accounts can be tax free, however, you should always make sure that you deeply understand the taxing situation on these instruments before you actually put your money into them. In some, federal taxes or state taxes (or in some cases local income taxes) may be waived, but one doesn't imply the other, and the last thing you want is the surprise that you do owe taxes on a supposedly tax free investment.
If your portfolio has taken a little drive over the past year, you may find some solace in the fact that you can write off some of your losses. Up to $3,000 in fact. After three grand, you'll have to carry over your losses each year. This can result in a ton of paperwork, so make sure that the assessed tax difference will make up for the extra effort these filings would take.
Also make sure that you don't mix and match tax-beneficial instruments. You shouldn't put municipal bonds or tax free money market accounts in your IRA, for example. Since they're both tax free, you can end up losing out on the tax break the other provides. It's typically a better idea to use these instruments in conjunction with your regular assets. This is one of the points that I agree with the tax experts on. It just makes sense.
But I just don't agree with their investment strategy, as I mentioned before. It's all well and good to keep your taxes in mind when you're planning your investments out - and it's essential when planning for retirement - however, I just can't justify their methods. If you have had a good year financially, and find yourself in a higher tax bracket, chances are that you have a pretty nice retirement plan already. For someone making six figures, the ceiling on retirement contributions is just not enough money to be their primary focus of investment attention. If you know what you're doing, you will make money. I would much rather make money that taxed at 99% than not make a cent. It just doesn't make much sense to say that you wont invest outside your retirement account, just because you don't want it to be taxed.
Of course, if you're in a lower tax bracket, the experts recommend that you go ahead and invest in taxable securities, since your tax rate is less than, say, Bill Gates. I'm sorry, but this is ridiculous. It's pretty unnecessary for someone in a lower bracket to focus on taxable accounts alone. Actually, it's probably more important for you to pour money into your retirement accounts. With the battles going on in Washington over the "social security crisis" (which we'll touch upon next month), the best way to secure your future is to actively invest in it. If you're an active investor, splitting your investment allocated income fifty/fifty for your retirement and taxable investment accounts isn't out of line. If you don't invest very actively, and you don't think you'll need access to your retirement money, don't think twice about putting the majority of it in a tax deferred retirement account.
Essentially, my point is that your investment decisions shouldn't be held back in fear of your tax burden. If you can balance the two out, you might just find that it does make sense (and hopefully, you'll turn out more financially fit than you were before). A whole new tax year awaits, and we're ready for it.
Jonas Elmerraji is the founder and editor of growFolio, the world's first free online investment and business magazine. Issues are available online at http://www.growfolio.com
'The Untouchables': How Columbia and N.Y.U. Benefit From Huge Tax Breaks The New York Times
South Texas county orders deleted delinquent taxes reinstated and paid, including sheriff’s - Border Report
South Texas county orders deleted delinquent taxes reinstated and paid, including sheriff’s Border Report
These are the U.S. states where homeowners pay the most in property taxes—California isn't in the top 5 - CNBC
These are the U.S. states where homeowners pay the most in property taxes—California isn't in the top 5 CNBC
Why tourist taxes are on the rise – DW – 09/25/2023 DW (English)
Port St. Lucie lowers millage rate amid complaints over rising property taxes - WPTV News Channel 5 West Palm
Port St. Lucie lowers millage rate amid complaints over rising property taxes WPTV News Channel 5 West Palm
Intuit Pushing Claim That Free Tax-Filing Program Would Harm Black Taxpayers — ProPublica - ProPublica
Intuit Pushing Claim That Free Tax-Filing Program Would Harm Black Taxpayers — ProPublica ProPublica
Hunter Biden in GOP's crosshairs again as tax panel sets vote on disclosing more confidential info - POLITICO
Hunter Biden in GOP's crosshairs again as tax panel sets vote on disclosing more confidential info POLITICO
Two Promoters Charged in Alleged Nationwide Illegal Abusive-Trust ... Department of Justice
Spain charges pop singer Shakira with tax evasion for a second time and demands more than $7 million - ABC News
Spain charges pop singer Shakira with tax evasion for a second time and demands more than $7 million ABC News
Roofing company loses court fight over unpaid employment taxes Iowa Capital Dispatch
Analysis | There's an Obvious Way Rishi Sunak Can Fix Inheritance ... The Washington Post
City taxes projected to drop (a smidge) for Mankato homeowners Mankato Free Press
This Is How Super-Healthy Americans Plan Their Taxes Yahoo Finance
Ohio lawmakers take aim at growing property taxes The Highland County Press
Efforts to eliminate grocery tax stall despite bipartisan support Muskogee Daily Phoenix
How do Roth IRA taxes work? USA TODAY
13-Minute Gulfport Council Meeting on Taxes and Budgets The Gabber Newspaper
Columbus Township parcel fetches $103K at tax sale timesobserver.com
Taxes and a new school Boothbay Register
Deadline for Pittsburgh Mills Mall owners to pay millions in taxes, avoid sheriff’s sale looms - WPXI Pittsburgh
Deadline for Pittsburgh Mills Mall owners to pay millions in taxes, avoid sheriff’s sale looms WPXI Pittsburgh
City Council approves tax increase in Naples for 2024, despite ... Naples Daily News
Win for Taxpayers in Transition Tax Case Would Cast 'Cloud of ... - Thomson Reuters Tax & Accounting
Win for Taxpayers in Transition Tax Case Would Cast 'Cloud of ... Thomson Reuters Tax & Accounting
Tyler Bowen: Property taxes are unequal mess Missoulian
Watch Out New York – New Jersey Wants Its Taxes Too! - Employee ... Mondaq News Alerts
East Cleveland development project triggers excitement and ... News 5 Cleveland WEWS
VOICES: Ohio needs to close its unjust tax foreclosure loophole Dayton Daily News
Get ready for tax year 2023 now TheStreet
Board Prepares To Set Property Taxes | Webster Kirkwood Times ... Webster-Kirkwood Times, Inc.
Will You Owe Taxes When You Sell Your Home? Morningstar
Fulton board to consider tax breaks for data center, housing projects - The Atlanta Journal Constitution
Fulton board to consider tax breaks for data center, housing projects The Atlanta Journal Constitution
Grocery sales tax break is missing some consumers – Tennessee ... Tennessee Lookout
38 States That Don't Tax Social Security Benefits The Motley Fool
Man buys 58 properties in Luzerne County delinquent tax auction The Times Leader
2023 Senior Tax Freeze application deadline fast approaching ... Philadelphia Water Department
Median Household Income After Taxes Fell 8.8% in 2022 U.S. Census Bureau
St. Pete Beach Discusses Loud Music, Budgets, and City Manager The Gabber Newspaper
These are the U.S. states with the highest property taxes—New York and California aren't in the top 10 - CNBC
These are the U.S. states with the highest property taxes—New York and California aren't in the top 10 CNBC
Two Tax Shelter Promoters Found Guilty in Billion-Dollar Syndicated ... Department of Justice
California Democrats misfired by taxing guns and ammo Los Angeles Times
How AI will impact the tax profession Thomson Reuters Tax & Accounting
Gloucester County residents to vote on proposed tax increase bond referendum 13newsnow.com WVEC
QCDs: A Tax Break Worth the Hassles - WSJ The Wall Street Journal
A guide to: Sales and use tax returns efficiency Wolters Kluwer
Property tax bills arrive next month. Here is what's new Fort Worth Report
Virginia sports betting tax revenue doubles year over year 13newsnow.com WVEC
Tax Take: A Roller Coaster Week Ahead - Tax Authorities - United ... Mondaq News Alerts
Social Security 2023: 5 Tax Breaks Social Security Recipients Qualify For But May Not Know About - Yahoo Finance
Social Security 2023: 5 Tax Breaks Social Security Recipients Qualify For But May Not Know About Yahoo Finance
Pay Taxes Dare County, NC (.gov)
Pay Taxes Online Clatsop County (.gov)
District of Connecticut | Connecticut Dentist Admits Evading Taxes ... Department of Justice
Property Tax Information - County of Fresno Fresno County (.gov)
Bills, Payments & Taxes Anne Arundel County
Insider Guides to IRS Audits!
Ever wish that, as a business owner, you knew exactly what would raise "red flags" at the IRS? Or how to make an IRS audit go as smoothly and painlessly as possible?If you're in the right type of business, you can get that information, directly from the IRS!Traditionally, IRS examiners have been responsible for auditing many types of businesses. An examiner might audit a grocery store one week and a construction company the next.
Early Distributions From Retirement Plans
An early distribution from an Individual Retirement Arrangement (IRA) or a qualified retirement plan need not be a "taxing" experience. Fortunately, there are exceptions to early distributions.
Alas! In E-Commerce Taxland
In trying to comply with tax laws for your e-business, you may find yourself falling down the rabbit-hole,going through the looking glass, and attending a Mad Tea-Party.Common sense, logic, and fairness never did apply fully to the field of taxation but this is especially true of e-commerce transactions.
Corporations Failing To Claim AMT Exemption Overpay Taxes By $11,000
Does your incorporated business pay alternative minimum tax ["AMT]? If so, there is a 93% chance you have been overpaying your taxes by an average of $11,000 a year according to the Treasury Inspector General.The Office of the Treasury Inspector General for Tax Administration was created in 1999 to oversee the IRS.
Identity Theft - Impacting Your Taxes?
If your identity is stolen, your finances can quickly become a nightmare. A less obvious problem is the effect identity theft can have on your taxes.
Organizing Your Taxes
Does this scene sound familiar? It's April 7. You haven't seen the top of your dining room table in two weeks because of the piles of paid bills, receipts, canceled checks, and unidentified cash register receipts covering it.
Six Urban Myths About Taxation
Six Urban Myths - Taxation"I am proud to be paying taxes? I could be just as proud for half the money." - Arthur Godfrey Temporary Taxation in Canada In 1917, the Income War Tax Act (7-8 George V, Chap.
Knock-Knock-KnockWho's there?The IRS!The next quarterly payment of estimated income tax forthe self-employed is not far off. Network marketers whoreceive a form 1099 at the end of the year, and/or whoare expected to owe $1,000 or more in taxes, must filea form 1040-ES Payment Voucher quarterly to avoidpaying a penalty.
10 Tax Tips to Reduce Costs and Increase Income
No one likes paying tax. Everyone understands that tax is a necessary evil and that without it our government would not be able to afford our roads, health services, education, welfare system etc.
Getting A Second Extension to File 2004 Taxes
Millions of people file tax return extensions every year. The tax filing deadlines can rush up on your quickly.
What Is Tax Law?
The federal tax code is complex. This complexity generally arises from two factors: the use of the tax code for purposes other than raising revenue, and the feedback process of amending the code.
Tax Investigation - What You Need To Do
The knock on the door from a Tax Inspector is something that every taxpayer fears. Your immediate thoughts will be "Have I been honest with my tax returns or not".
The Internet Tax Man Cometh
Q: I was contacted by the city tax collector to say that my business is scheduled to be audited to see if I owe sales tax on items purchased on the Internet. Can they really make me pay sales tax on internet purchase? I thought you could buy things online tax free? -- Charlie B.
What the Tax Software Companies Dont Want You to Know
Haven't done your taxes yet? No problem. Now there is a new way you can use top tax software programs, like TurboTax and H&R Block, to get your taxes done quickly and easily.
Deducting Points On Home Refinances
Deduction of Refinance PointsAny points that you pay in the refinancing of your residence are tax deductible over the length of the loan in question. The deduction is allowable only if the residence is your primary home and the new mortgage replaces a previous one and/or is used to improve the residence.
How to Check the Status of Your Tax Refund Online
So, you were pleasantly surprised to learn that you are getting a refund on your taxes. Congratulations! The question for most taxpayers expecting a return is, "Where is my refund?"Check Your Refund Status OnlineThe easiest way to check on your refund is to ask the IRS through IRS.
About Income Taxes; Tidbits
1812The first attempt to impose an income tax on America occurred during the War of 1812. After more than two years of war, the federal government owed an unbelievable $100 million of debt.
To Tax or Not to Tax - This is the Question
To tax or not to tax - this question could have never been asked twenty years ago.Historically, income tax is a novel invention.
Tips and Simple Guidelines on How to Calculate Payroll Taxes
Managing a business small, medium or big requires you to pay your taxes, as well as your employees taxes. Managing a payroll can be an arduous and taxing job, no pun intended.
Business Tax Loophole: Leasing Assets To Your Corporation
While there are many equally valid reasons to incorporate, saving money on taxes is a consideration that can yield relatively immediate results. Leasing assets to your corporation is a tax strategy you should absolutely consider if you already have a corporation or are thinking about forming one.
|home | site map|