I can show you how to pay half as much tax on dividends and gains from selling investments? Furthermore, your tax savings will increase as your tax bracket rises. T he secret lies in making sure you have qualifed dividends and long term capital gains.
Why do you want “qualified dividends”? A recent tax return client proudly showed me $60,000 in dividends. Impressive. However, he paid more than $6,000 in extra taxes because the dividends were not “qualified.” Qualified dividends (dividends from U.S. companies) can save as much as 50% in taxes. This is true because your tax rate may be 39.6% or more whereas the maximum income tax rate on qualified dividends is 20%.
The same rate limit applies to long-term capital gains. Long-term capital gains are those that result from the sale of investments that are held more than one year.
A 3.8% surcharge may apply to gains or dividends of higher income taxpayers, but it does not affect the advantage here.
My advice: As your tax rates rise, you save more taxes with qualified dividends and long-term capital gains. Discuss your tax situation with me and your investment adviser.
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