Let us create a 3d Digital eBook for you! DigyCat.com
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
Taxes - Google News
This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news
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.
Fraudulent Tax Shelters - KMPG Goes Down Hard
In the largest criminal tax case ever filed, KMPG has copped a plea to using fraudulent tax shelters to bilk the government out of 2.5 billion dollars.
What is a Federal Tax Lien?
A Federal Tax Lien (FTL) is a legal instrument that secures the claim of the United States in the right, title, and interest of a debtor taxpayer's assets. It is a public document and is recorded at the County Clerk's office or the Secretary of State, depending on local law.
How to Donate Your Car to Charity and Get Tax Deduction
Donating your used car to charity is a win-win situation; the charity gets your gift and you get tax deduction. Below are some simple steps to make a car donation.
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.
Amending Procedural Laws for Collection of E-taxation
The electronic transaction ordinance defines the certificated copies in which are to be presented for adjudication. Where any law requires or permits the production of certified copies of any records, such requirement or permission shall extend to print outs or other forms of display of electronic documents where, in addition to fulfillment of the requirements as may be specified in such law relating to certification, it is verified in the manner laid down by the appropriate authority.
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.
Tax Deduction for Alimony Payments? - Yes!
Over 50% of marriages end in divorce in the United States. Many divorce decrees include provisions for the payment of alimony.
Understanding Marketing Tax Deductions
Marketing is a necessary expense in running practically any business and the IRS acknowledges as much. You may run advertisements on or in the Internet, radio, television, magazines, newspapers and other media to sell your products or services.
Seven Key Tax Deductions for the Self Employed
As a sole proprietor, it's wise to familiarize yourself with the some key deductions that may reduce your tax bill for 2004.Small-business consultants generally recommend that you hire an accountant to prepare your tax returns, payroll and financial statements.
Furnishing Evidence in E-Tax Compliance
Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This concept is recognised in all tax statutes, which sets out taxpayers' primary obligations, and clearly spells out that taxpayers are required to determine the amount of tax payable correctly and to pay it on time.
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.
Small Business Tax Deduction - Write-Off Bad Debts
Practically every small business has receivables that it cannot obtain from clients. If your small business doesn't have any such receivables, consider yourself lucky.
Tax Tips to Save Money on Taxes - Get the Corporate Kick and Save Loads of Money
Why a Corporation Helps Save You TaxesThe Tax Rates (Notice anything unusual?):The following tables provide a list of the tax rates for individuals and corporations:Personal: $0-$24,650 15% $24,651-$59,750 28% $59, 750-$124,650 31% $124,651-$271,050 36% $271,050+ 39.6%Tax SecretsCorporate: 0-$50,000 15% $50,001-$75,000 25% $75,001-100,000 34% $100,001-$335,000 39% $335-000-$10M 34%If you examine them closely, you will see at least one glaring contrast.
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.
Small Business Tax Issues for Self-Employed Individuals
The United States is a nation of entrepreneurs. There are literally tens of millions of self-employed individuals that enjoy pursuing their dream business.
Tax Trap #4 -- The Quagmire of Depreciation
If you are a Small Business Owner or Self-Employed Person,there's one especially lucrative tax break that not onlyputs money in your pocket, it also makes the filing ofyour business tax return much simpler.What am I talking about? It's called the Section 179deduction, and if there's one tax break you need to understand, this is it.
Send Your Kids To Summer Camp and Write It Off
If you paid someone to care for a child so you could work, you may be able claim a tax credit for child and dependent care expenses on your federal income tax return. This credit is available to people who, in order to work or to look for work, have to pay for child care services for dependents under age 13.
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.
Take Control of Your Taxes
As everyone in the U.S.
PrimeNews Domain Is For Sale - $5,000 For Enquiries eMail Us
© www.PrimeNews.biz - 2012