Changes to the tax laws that significantly lower
the long-term
capital
gains tax
rate and apply those rates to qualifying
dividends make taxable investment accounts more attractive than
ever.
You
pay no income tax on paper profits — or increases in an investment’s
value while you own it — until you sell the investment and
realize the profit. If you’ve held the investment for more
than a year when you sell, you owe tax on any gain at the long-term
capital
gains
rate. Beginning in May 2003, long-term capital gains
tax rates are 15% if your income tax bracket is 25% or higher,
and 5% if your income tax rate is 10% or 15%. These low rates
now also apply to many dividends and mutual fund distributions,
which used to be taxed at your income tax rate.
Make sure to check with your financial or
tax adviser to learn more about how the new tax laws affect your
long-term investment strategy.
You also need a strategy for liquidating investments that have appreciated in value. One approach is to offset gains on some investments by selling investments that have dropped in value. That reduces the amount that’s subject to tax.
You
pay no income tax on paper profits — or increases in an investment’s
value while you own it — until you sell the investment and
realize the profit. If you’ve held the investment for more
than a year when you sell, you owe tax on any gain at the long-term
