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title: How do taxes factor into your investment strategy?
description: Income investments aren’t all alike when it comes to taxes. So it’s important to be aware of the different tax treatments when managing your income investments.
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| Having trouble viewing this email? Click here to view the online version.       November 9, 2017       Hi There, Many investors, especially more risk-averse ones, hold much of their portfolios in “income investments” — those that pay interest or dividends, with less emphasis on growth in value. But all income investments aren’t alike when it comes to taxes. So it’s important to be aware of the different tax treatments when managing your income investments.   How do taxes factor into your investment strategy?  Please contact us.  Varying tax treatment The tax treatment of investment income varies partly based on whether the income is in the form of dividends or interest. Qualified dividends are taxed at your favorable long-term capital gains tax rate (currently 0%, 15% or 20%, depending on your tax bracket) rather than at your ordinary-income tax rate (which might be as high as 39.6%). Interest income generally is taxed at ordinary-income rates. So stocks that pay dividends might be more attractive tax-wise than interest-paying income investments, such as CDs and bonds. But there are exceptions. For example, some dividends aren’t qualified and therefore are subject to ordinary-income rates, such as certain dividends from: Real estate investment trusts (REITs), Regulated investment companies (RICs), Money market mutual funds, and Certain foreign investments. Also, the tax treatment of bond interest varies. For example: Interest on U.S. government bonds is taxable on federal returns but exempt on state and local returns. Interest on state and local government bonds is excludable on federal returns. If the bonds were issued in your home state, interest also might be excludable on your state return. Corporate bond interest is fully taxable for federal and state purposes. One of many factors Keep in mind that tax reform legislation could affect the tax considerations for income investments. For example, if your ordinary rate goes down under tax reform, there could be less of a difference between the tax rate you’d pay on qualified vs. nonqualified dividends. While tax treatment shouldn’t drive investment decisions, it’s one factor to consider — especially when it comes to income investments. For help factoring taxes into your investment strategy, please contact us in Brea (714.990.1040), Visalia (559.732.4135), or Twin Falls (208.949.6236). Thank you.           The Latest from Frazer's Blog Retirement Savings for the Self-employed How can a cash balance plan turbocharge retirement savings? Should you bunch your medical expenses in 2017? Increase Your 401(k) Contributions Before Year End 2017 Q4 tax calendar: Key deadlines for businesses and other employers         Frazer LLP \| 135 S. State College Blvd., Brea, CA You received this email because you are subscribed to Marketing Information from Frazer LLP. If you prefer not to receive emails from Frazer LLP you may unsubscribe or set your email preferences. |
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