Investment Taxes Explained

The federal government taxes investable income such as dividends, interest, and rent on real estate, just to name a few.

Tax on Dividends

If you have money invested in a security (e.g. stocks, bonds, real estate) then there’s a good chance that you are receiving a dividend on each mutual fund or bond fund that you own, for instance. A divided is an investment return on a specific security, in the form of a payment, and it is taxable. Thankfully, you receive dividends after they have already been taxed by the federal government.

Qualified vs. Non-Qualified Dividends

If the company resides in the United States, or in a country that has a double-taxation treaty with U.S. acceptable to the IRS, a tax rate of 15% on “qualified dividends” will be applicable. This 15% tax rate (paid on qualified dividends) is considered beneficial to shareholders as many of them would otherwise be taxed at their regular income tax rate, which is often more substantial. If a shareholder’s dividends get taxed at their regular income tax rate, it will be paid in the form of a “non-qualified dividend” which are common amongst foreign companies or entitles. This non-qualified income (a dividend paid from interest on bonds held by a mutual fund, for example) will be taxed on a sliding scale up 39.6%, in 2013.

In Summary

If you have investments and are curious to find out what taxes you are paying on them, please reach out. Blue Oak CPA is a full-service firm and we would love to work with you!


By | 2017-08-22T15:33:38+00:00 August 22nd, 2017|Governments, Taxes|0 Comments