OfflineManaging Your Investments to Trim Your Tax Liabilities
If you don’t have a strategic tax plan, building wealth through investing can be like running into the wind. Your running partner is now the taxman, and he’s taking his cut of every dime you earn. Paying out part of your earnings to the IRS is a fact of life-but that’s no reason to pay more than you have to.
Make Money, Owe Taxes
Uncle Sam taxes you on interest, dividends and capital gains. The tax rates on these types of earnings change periodically based on who’s in charge at the White House. The current guidelines for taxpayers in the 15 percent tax bracket or higher are:
* Capital gains earned on securities held for longer than one year are taxed at 15 percent.
* Capital gains earned on securities held for less than one year are taxed as regular income.
* Capital losses can be used to offset capital gains in the same year, but not if you sell a position at a loss and repurchase the same position within the next 30 days.
* Dividends are taxed at 15 percent. This rule is set to expire in 2010; if it is not renewed, dividends will then be taxed as regular income starting in 2011.
Trimming Your Tax Liability
The most effective way to cut your tax liability is to stop making money. But that’s just not practical. Instead, see if you can use these strategies to control your tax bill:
* Pick mutual funds with a low turnover percentage. High turnover means the fund is doing a lot of trading, and trading creates taxable gains.
* When you take profits, review your portfolio to see if you can sell a losing position to offset your capital gain.
* Estimate your taxes in December and take necessary actions before the tax year ends.
* Maximize your IRA contributions.
* You can deduct investment-related expenses if they exceed 2 percent of your adjusted gross income; keep records and take your deductions!
* Emphasize growth stocks over dividend-paying stocks.
* Follow a buy-and-hold strategy.
There’s no glory in overpaying your taxes. Make wealth-building easier on yourself by having a tax plan and sticking to it.
Anita
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TWITTER - anitarny / FACEBOOK - anitarny
"FAILURE IS NOT AN OPTION"
"Follow a buy-and-hold strategy"
this is what our father and grandfather did. it's not what makes you rich today.
Dont ever NOT take profit just cause you dont want to pay the tax man! Look at it like this "if you are paying taxes, you are making money!"
If I bought Apple at $81 on 07 (which I did) and help it till now I would be up 130%. Thats good right!? Well if I had sold it at $200 in Dec 07 I would have made 147% ! Then buy it back in Feb at say $120, (after it took the worst beating I have ever seen in a big tech stock) and sell it now, I would make ANOTHER 55% ! So by buying selling, buying selling I have made a total of 202% verse 130% if I had bought and held like past generations!!!
D
Don't Wish the Past, Create the Future! - DH
Good point.. though the 202% to 130% comparison is sort of apples to oranges. There is tax due on the 147% gain part of the 202%.
apples to oranges....thats 72% ! Thats a big diff.
The taxes (short term) say are 28% of the profit. You will make much more by taking your profits and buying back at a lower price.
Lets say you are a buy a hold person....when you sell (and eventually you will!) you will have be tax on that, so no matter waht you will pay tax.
And do you really think taxes will be lower in say 5-10 years or more? ...I bet everything on MORE. I'd rather take my profits and pay now.
Don't Wish the Past, Create the Future! - DH
I believe 100% in those, too. If you ARE going to own mutual funds or stocks, put the max you are allowed into a Roth. UNLESS you need the money to make a big turnover in REI, that is. I like to have my eggs in several baskets.
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
yes Roths are a great tool, as long as they are self directed. Meaning you manage them yourself and PAY noone any fees! Same thing goes for IRA's.
Most of my trades are in my IRA and my ROTH.
D
Don't Wish the Past, Create the Future! - DH
For residential property, If sold next year, the Federal Cap Gains are 15% and the state (of Ca) are what?
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