480-354-1040 | hello@cdtax.com

CD Tax & Financial
purple client center button
Schedule your free consultation today
  • Home
  • Services
    • Accounting Services
    • Tax Preparation and Planning
    • Tax Resolution
      • Help with Your IRS Audit
      • Filing Prior Years Return
      • Owing the IRS Money
      • Behind on Payroll Taxes
      • When Your Spouse Owes the IRS
    • PPP Loan Forgiveness Assistance
    • Bookkeeping
    • Payroll
    • Advisory Services
    • Consulting for QuickBooks®
    • Training for QuickBooks®
    • Cloud Accounting
  • Products
    • QuickBooks Online
    • QuickBooks Online Advanced
    • QuickBooks Desktop
    • QuickBooks Enterprise Solutions
    • QuickBooks Point of Sale
    • QuickBooks Payments
  • Industries
    • Services
    • Construction
    • Medical and Health Care
    • Real Estate
    • Non Profit
    • Retail
    • Restaurant
    • Manufacturing
    • Wholesalers and Distributors
    • eCommerce
  • Resources
    • Resources
    • Mobile Accounting
  • Testimonials
  • Blog
    • Blog
    • Newsletter
    • Weekly Tax Tip
  • About us
  • Contact
  • Home
  • Services
    • Accounting Services
    • Tax Preparation and Planning
    • Tax Resolution
      • Help with Your IRS Audit
      • Filing Prior Years Return
      • Owing the IRS Money
      • Behind on Payroll Taxes
      • When Your Spouse Owes the IRS
    • PPP Loan Forgiveness Assistance
    • Bookkeeping
    • Payroll
    • Advisory Services
    • Consulting for QuickBooks®
    • Training for QuickBooks®
    • Cloud Accounting
  • Products
    • QuickBooks Online
    • QuickBooks Online Advanced
    • QuickBooks Desktop
    • QuickBooks Enterprise Solutions
    • QuickBooks Point of Sale
    • QuickBooks Payments
  • Industries
    • Services
    • Construction
    • Medical and Health Care
    • Real Estate
    • Non Profit
    • Retail
    • Restaurant
    • Manufacturing
    • Wholesalers and Distributors
    • eCommerce
  • Resources
    • Resources
    • Mobile Accounting
  • Testimonials
  • Blog
    • Blog
    • Newsletter
    • Weekly Tax Tip
  • About us
  • Contact

Capital gains and dividends: Knowing the rules can cut your tax bill

February 5, 2020 In Individual Tax, Tax, Tax Planning
Tweet
Share
Share
Pin

Capital Gains and Dividends

Capital Gains and Dividends are subject to a number of different tax rates. Because of this, know the rules can be a great way to cut your tax bill.

Dividends

For most taxpayers, qualifying dividends are currently taxed at a maximum rate of 15%. If you’re in the 10% or 15% ordinary income tax bracket, the dividend tax rate is 0%. If you’re in the top ordinary income bracket of 37%, the dividend tax rate is 23.8% (20% plus a 3.8% surtax as part of the Affordable Care Act).

Regular income tax rates apply when you withdraw dividends earned within retirement accounts, such as traditional IRAs, SEPs, and 401(k)s. These rates also apply to interest income, dividends from real estate investment trusts (REITs), and many preferred stock dividends.

Capital Gains

Short-term capital gains (assets owned for one year or less) are taxed as ordinary income. The tax rates on these investments vary from 0 to 37% prior to applying the possible surtax of 3.8% for the Affordable Care Act.

Long-term capital gains are typically taxed at 0 – 15% like ordinary dividends. However other rates apply depending on your income and the type of gain. Collectables are taxed at 28%. There is also a 3.8% investment surtax as part of the Affordable Care Act that can create a tax rate of up to 23.8% for regular long-term capital gains.

Some ideas

Review your investment program, keeping the following in mind:

  • Consider holding stocks that pay substantial dividends outside your retirement accounts. The dividends they earn are taxed at a lower rate than they would be in the future when withdrawn from your retirement account.
  • Consider holding taxable bonds and REIT shares within a retirement account, since their earnings otherwise would be taxed at the higher regular rates.
  • Consider holding growth stocks that pay little or no dividends in a taxable account to enjoy lower long-term capital gain rates. However, if you trade stocks frequently or own mutual funds that trade frequently, holding them in a tax-deferred retirement account might reduce your taxes overall.

Consider your situation

The above considerations will be affected by several additional factors. Obviously, the lower rates are more significant to those with higher income. Switching your existing investments might not be the best strategy. For example, the tax consequences of pulling stocks out of your IRA probably make that move prohibitive.

The bottom line: What’s good for one individual’s investment style might not work for another’s.

The capital gains rules can create sizable tax savings, but because of their complexity, they can also create unwanted tax obligations. If you are contemplating a major capital transaction, or if you would like a review of your overall capital gains picture, please don’t hesitate to call.

Stay Up To Date on Taxes that Affect You!! Subscribe to our General Taxpayer Weekly Tax Tip that includes bite-size and informative tips on tax and financial changes, Monthly Client Update Newsletter, and updates on our events and seminars. Follow CD Tax on Facebook!  

Tweet
Share
Share
Pin
401K capital gains dividends home long term

Monthly Archives

Categories

  • Accounting (40)
  • Accounting Software (12)
  • Amended Tax Return (4)
  • Blog (5)
  • Bookkeeping (2)
  • Bookkeeping Tips (11)
  • Business Development (28)
  • Business Growth (26)
  • Business Tips (94)
  • College (3)
  • Cool Tech Tools (13)
  • Cost-Saving Tips (14)
  • Cost-Savings Tips (5)
  • COVID-19 (50)
  • Customer Service Tips (6)
  • Decision-Making Tips (14)
  • Deductions (7)
  • Divorce (2)
  • Expense Reduction Tips (4)
  • Finance Management (10)
  • For Your Business (73)
  • Identity Theft (13)
  • Individual Tax (102)
  • IRS (44)
  • IRS Audit & Representation (4)
  • Legacy Planning (33)
  • Management Tips (10)
  • Marketing Tips (1)
  • Money Management (18)
  • News (20)
  • Payroll Tips (22)
  • Personal Development (6)
  • Profitability Tips (12)
  • QuickBooks Help (1)
  • QuickBooks Software (1)
  • QuickBooks Training (1)
  • Tax (59)
  • Tax Dates (23)
  • Tax Planning (21)
  • Tax Rates (5)
  • Tax Records (8)
  • Tax Resolution (2)
  • Time Management Tips (4)

Sitemap

  • Home
  • Services
  • Products
  • Industries
  • Resources
  • Testimonials
  • Blog
  • About Us
  • Contact

Contact Us

Tax Services, Accounting Services and Services for QuickBooks®

CD Tax & Financial
Tax Girl Enterprises LLC

8659 E. Pampa Ave
Mesa, AZ 85212 United States

480-354-1040 | hello@cdtax.com


Intuit, QuickBooks, and QuickBooks ProAdvisor are registered trademarks of Intuit Inc. Used with permission under the QuickBooks ProAdvisor Agreement.

purple client center button

Schedule your free consultation today CD Tax & Financial Mesa AZ

Subscribe to our newsletter today CD Tax & Financial Mesa AZ

©2020 CD Tax & Financial | Tax Girl Enterprises LLC
Site Design by Accelerator Websites