Tax Planning For Your Capital Gains & Dividends

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(Credit: Thinkstock)

(Credit: Thinkstock)

420x316-grad-lee Dee Lee
Dee Lee is a Certified Financial Planner who received a diploma in...
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BOSTON (CBS) – The long-term capital gains tax rate for this year is 0%, 15%, or 20%, depending on your marginal tax bracket.

To be eligible for the long-term capital gains tax you must have held the asset for at least one year. Hold it any less and it is taxed as ordinary income.

Capital Gains & Dividend Tax Rates –

Tax Rate Single Married
0% Up to $36,250 Up to $72,850
15% $36,250 to $400,000 $72,850 to $450,000
20% Over $400,000 Over $450,000

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.

So if you are rebalancing your portfolio and want to sell some holdings be sure you check the tax ramifications. Check in with your financial planner or tax preparer for more help in rebalancing.

Also this may be a good time of year to be checking on your mutual funds. Mutual funds must make annual payouts of interest, dividends and capital gains, and they do this usually toward the end of the year.

Call your mutual fund company to see when they will be making their distributions and find out what your tax liabilities are going to be.

Dividends are a way a corporation shares its profits with its shareholders. The same rates as capital gains apply here. For most taxpayers it will remain at 15%.

Qualified dividend income are dividends paid on common stock and certain preferred stock. Your mutual fund could also pay out to you a distribution that would be considered a dividend because they hold dividend-paying stocks.

Dividends paid out on money market funds and Real Estate Investment Trusts (REITs) are not considered qualified dividends and are taxed as ordinary income.

This is a good time of year to review your portfolio and see if you can harvest any losses you have. You can sell those stocks to offset your gains.

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