Mutual Funds- This year , many funds are warning shareholders that payouts will be large
Reminders:
Note The Holding Period Rules For DividendsThe 15% top tax rate is not available unless you have owned the shares for at least 60 days before and after the date the stock goes ex-dividend. So, if you buy stock just before it pays a dividend and sell it soon thereafter, the dividend is taxed as ordinary income.
Tax-Favored Dividends Won't Help You Deduct Your Margin Interest, as a general rule. You have to elect to waive the 15% top rate on them to have them count as investment income so you can deduct more interest
Taking short-term gains can boost your margin interest deduction, which is limited to your net investment income. Short-term capital gains count as investment income. Note that long-term gains are not treated as investment income unless filers forgo taking the 15% top rate on them
Watch The Holding Period For The 15% Top Rate On Long-Term Gain. You must own the asset for more than one year to be eligible. Taxpayers in the 10% & 15% brackets get a 5% rate on long-term gains. However, once their gains lift their income into the 25% tax bracket, the balance of their profit is taxed at the standard 15% maximum rate
Some Gains Have Higher Tax Rates - Collectibles. Profits on sales of art, antiques, gems, stamps, coins and bullion have a top rate of 28%
Depreciation Recapture On Real Estate. It's taxed as much as 25%.
Short-Term Gains. Ordinary income rates of up to 35% apply.
Look Out For The Wash-Sale Rule -Selling close to the date the mutual fund dividends are reinvested can trigger this rule, and you may be nabbed if you use your IRA to quickly buy back the stock you sold at a loss. You're OK , however, if you sell one mutual fund and buy another with similar investment goals.
It can also affect bond "swaps". If you sell bonds at a loss and reaquire bonds of the same issuer, you can avoid the wash-sale rule by purchasing ones that have different maturities or interest rates.
Kiplinger
