The income that investments pay investors is a great thing. Dividends are essentially free money to traders even as we get “paid” for investing in certain stocks and shares. Capital increases are a good bonus by the end of the one-fourth or year which allows us to take pleasure from the advantages of a rising currency markets or smart goes by the account manager.
The downside of investment income is that it is taxable. Ahh, taxes. We just can’t avoid them no matter what. Luckily, investment income is taxed at different levels and perhaps, at a lesser rate than ordinary income. Below is a basic guide to how investment income is taxed. This guide won’t cover everything related to investment income and taxes 100%, so that it makes sense to talk to your accountant about some of this at length. Plus, Congress likes to change the tax code almost yearly so things are always changing.
With having said that, I hope that this guide will provide you with an idea of how to invest your cash smarter and in doing so, pay less fees. What is Ordinary Income? Before we get into the various forms of investment income, I need to determine for you what normal income is really as I will be using that term throughout this post.
Ordinary income is exactly what the IRS deems to be income that gets taxed at the tax rates you see everywhere. Which means that your paycheck is considered ordinary income. Likewise, …