Compounding investing wisdom...
Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
While you’re lavishing your partner with cards, candy, flowers, and dinner today, understand you could have gotten it all for less tomorrow. Ah…the price of love.
This is nothing new. Holidays are big business. And businesses take advantage of our willingness to conform. Continue Reading…
Investors with taxable accounts have a bigger pile of tax forms to deal with every year. Form 1099-DIV is one form you get when your investments pay out dividends and distributions. If you’re like me, it means you spend a little more quality time with tax software each year. Or, maybe you pass it off to your accountant. But do you really understand what is reported in each box of a 1099-DIV? Do you know how it affects your taxes or your investments?
Unfortunately, not all dividends and distributions are taxed the same. And it’s not always easy to figure out. I use TurboTax for help when I get stuck. Regardless, you should still understand what is reported on the 1099-DIV, the tax consequences of each box, and how it might affect your investments. In turn, it might even help you build a more tax efficient investment strategy and lower your taxes in the long run. Continue Reading…
Dividends tend to get lumped as one single form of investment income. But the IRS doesn’t see it that way, dividing the tax on dividends into two types: ordinary and qualified dividends. This is good to know around tax time. But it’s just as important when choosing investments for a taxable account, since taxes are another cost that eat into your returns.
First, all dividends are considered ordinary dividends. The problem, of course, is how we loosely use the term dividends to describe any type of payout from stocks, mutual funds, savings accounts, or other investments. Sometimes that “dividend” is actually interest income or a capital gains distribution. Continue Reading…
Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
There’s a fine line between making the news and reporting it. The role business news plays or should play gets questioned often. Who does it cater to, really? Continue Reading…
The IRS has different tax forms for every type of income imaginable. With investing, that can quickly get complicated and lead to mistakes. At the very least, you should have a basic idea of what the tax forms do and which forms to expect each year. That alone will give you a better picture of your tax costs, allowing you to build a more tax efficient portfolio.
Investment income comes in three forms: earned interest, dividends, and capital gains. Each is taxed differently. Earned interest is regular income subject to federal income tax while dividends and capital gains has its own tax rates.
You’ll get separate tax forms for each income type. But there’s a good chance you’ll get multiple forms for each investment too. For instance, TD Ameritrade sends me a consolidated 1099 every year for the stocks and ETFs I own, which is just a 1099-INT, 1099-DIV, and 1099-B rolled into one big statement. Below are the more common tax forms you’ll receive for investment income. Continue Reading…
Dividends are the big reason investors turn to real estate investment trusts or REITs. What many people don’t know is that those dividends are not taxed like normal dividend stocks. Thanks to an overly confusing tax code, owning REITs can get complicated. Understanding the REIT taxation rules could save you from a big charge when it’s time to file your taxes.
Real estate investment trusts were established to allow small investors access to large income producing real estate assets, much like how mutual funds provide access to stocks. In doing so, REITs were giving a special tax designation used to cut their corporate taxes.
In return for the corporate tax benefits, REITs must pay out 90% of their taxable income to shareholders in the form of dividends. While the REIT tax code simplifies things from a corporate perspective, this is where it gets confusing for shareholders. Continue Reading…