How To Save Taxes On Stocks - 5 Tax Saving Tips For Stocks and Dividends | Tax Diet Episode 2

How To Save Taxes on Stocks 5 Tax Saving Investment Tips. Easy tips to save taxes on stocks and dividends.

1. Think Long-term - The first and easiest way to save on taxes when it comes to investing in the stock market in taxable brokerage account is to invest for the long-term. In order for us to get the long-term holding status treatment we need to hold the stock for at least a year and one day. The long-term status allows us to obtain the more favorable capital gain rates. Capital gain rates are one of the most favorable tax rates you can obtain, and second only to tax-exempt income. The maximum capital gain rate is only 20% which 17% lower than the highest ordinary income tax rate of 37%.

To put this into perspective of the importance of investing long-term let’s pretend that Chipper has purchased 100 shares of Apple stock on January 1st of 2017. On January 1st of 2018 he sales his shares of apple for a taxable gain of $10,000. What major error did Chipper make? Notice he did not hold his shares for a year and one day, causing him not to qualify for the capital gain rate treatment. His investment holding is considered short-term which causes him to pay ordinary tax rates on his $10,000 gain. Assuming Chipper is in the highest tax bracket Chipper will pay $3,700 in federal income tax.

2. Qualified dividends –

1A. Holding Period - Common stock investors must hold the shares for more than 60 days during the 121-day period that starts 60 days before the ex-dividend date. For preferred stock, the holding period is more than 90 days during a 181-day period that starts 90 days before the ex-dividend date.

3. Do you really need to sale this right now? Sale when your income low - As a CPA what I find in the real world is that there are many people who actually do not know when gains on securities become taxable. Therefore, it is important to remember that gains only become recognized and taxable when the stock or security is sold. For many of us we probably already knew that, but it is important reminder that you and I control when we pay the tax on our investments.

Our overall nominal tax rate is based on our total adjusted gross income for the year which means capital gains factor into that. This means that your stock sale gains could potentially bump you up to a higher income tax bracket.

By doing some basic tax planning and knowing where your income falls in line with the tax brackets you might be able to save yourself some serious tax by strategically planning when and how much of your stock to sale.

For example instead of selling all of the stock at once in the same year, maybe you spread out the sale by selling some of the shares in 2017 and some of the shares in 2018. Something to think about, because If you bump up your income to the next tax bracket it means you could be paying an extra 3% on all of your income (Not just capital gains)

You can sale some of your losing stock as well towards the end of the year to shave off $1,500 - $3,000 I taxable income depending on your filing status.
4. Losing is not all that bad (Sale stock at a loss) as many investors have experienced, (including me) sometimes we are going to find ourselves in a losing position on an investment. Obviously I’m not telling you to lose money on purpose here, but what I am saying is if you no longer want to hold that particular stock or investment and want to cut your losses so you can regain control of that capital you might consider selling your position during the calendar year. A person who files single or MFS for tax purposes can claim a $1,500 capital loss for that year. If you file MFJ you can deduct up to a $3,000 capital loss. This loss will offset your other forms of income such as taxable wages or business income. Losses in excess of those amounts will carry forward to the next year until they are used up.

5. Structuring your investments for tax efficiency – When I first started investing I so was focused on trying to learn investing I didn’t think about tax implications until much later on. You can structure your portfolio and investments in a way that can save you on your taxes.

1. Start with a Roth first
2. Be strategic about which accounts you use to buy certain investments.

Roth IRA, place your highest yield investments such income from master limited partnerships,or publicly traded partnerships, and REITS, and other high yielding assets into your Roth IRA. Reits do not receive qualified dividend treatment so they are a great income producing asset to hold within your Roth ira and all the dividends you will receive are tax free.

Видео How To Save Taxes On Stocks - 5 Tax Saving Tips For Stocks and Dividends | Tax Diet Episode 2 канала Money and Life TV