Tax Prep For Your 2017 Return: Taxes On Your Investments

BOSTON (WBZ-AM) – Let’s take a look at capital gains, losses, and dividends.

Capital Gains: This is the money you make if there was a profit when you sell an asset! These assets include property such as a home, collectibles or a car. It also includes investment property, like stocks, mutual funds and bonds.

The profit on investments that you hold for less than a year and then sell are considered short term capital gains. And the profit is taxed as ordinary income.

Investments that you hold longer than one year are taxed at a lower rate, a long term capital gains rate. If your gains come from stocks, bonds or mutual funds they will be taxed at either zero percent, 15% or 20%, depending on your marginal tax bracket.

And if you sell your collectibles such as oriental rugs, coins, crystal or antiques and made a profit your capital gains tax rate could be as high as 28%. If you bought gold or silver as a hedge against inflation and sell at a profit you could owe a hefty tax. If you sold your household stuff at a yard sale last summer you will not owe taxes on the stuff you sold.

In addition, high income taxpayers may have a 3.8% unearned income Medicare Contribution Tax applied to their capital gains and other net investment income.

Capital Losses: These are losses on your investments. You can use your losses against your gains. If you have a net loss you can use up to $3,000 against other income and you get to carry any excess loss forward which is a good thing. You can deduct capital losses on the sale of investment property but can’t deduct losses on the sale of property that you hold for personal use such as a boat or car.

Dividends: Corporations share their profit with their shareholders when they pay dividends from either current income or retained income.

The tax rate on dividends for most taxpayers will be 15% and for taxpayers in the lowest tax brackets it may be 0%. Start approaching $415,000 and you will pay the 20% rate. (Earn over $415,050 as an individual or $466,950 and your rate is 20%.)

Not all dividends qualify for the lower tax rate. Dividends paid by money market mutual funds or a Real Estate Investment Trust (REIT) generally do not qualify and will be taxed as ordinary income.

Distributions paid out by co-op banks, mutual savings banks, credit unions, savings and loan associations are often called dividends but are really interest

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Capital Gains & Dividend Tax Rates for 2017

Tax Rate               Single                                 Married

0%                       Up to $37,650                    Up to $75,300

15%                     $37,650 to $415,050          $75,300 to $466,950

20%                     Over $415,0500                  Over $466,950

You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m. and 3:55 p.m.

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