Mutual funds, bonds, and homeownership: all of these are great investment vehicles to ensure security for your future. But before you get ready to collect on any high-earning investments, it’s important to understand how investments are taxed, as well as how to make the most of your investments and avoid potential tax pitfalls.<\/p>\n
Bonds<\/strong><\/p>\n Government Savings Bonds<\/em> are exempt from local and state taxes<\/a>, and you can defer federal taxes until the bond is redeemed or until it matures. Municipal Bonds<\/em>, issued by a local city or town, are not subject to taxes at the federal or state level ? but they generally have lower interest rates. Qualified students may turn to Inflation-Adjusted Savings Bonds<\/em>, or ‘I Bonds,’ which allow you to deduct the interest you pay (after redeeming the bond) from your taxes.<\/p>\n Mutual Funds<\/strong><\/p>\n If you make an investment in a mutual fund, the fund is required to make yearly payouts of your capital gains (which are subject to capital gains taxes<\/a>). It’s recommended that you invest in a fund that ‘carries over’ its capital losses from previous years, so that even if you have a profitable investment year, you will be able to use the capital losses to offset your taxes.<\/p>\n Private Foundations<\/strong><\/p>\n If you run a tax-exempt private charitable foundation, you may still have to pay taxes on your investment income<\/a> due to a 2% excise tax. This tax is meant to defray the cost that the government incurs in regulating private foundations. Foundations that provide lower amounts of grants may only pay taxes of 1%, and some foundations (such as exempt operating foundations) may pay no taxes at all.<\/p>\n Appreciating Investments<\/strong><\/p>\n If you are able to hang onto an investment that appreciates in value (such as a house or piece of art) you should try to sell it during a less successful financial year. Since an appreciating investment<\/a> yields no income to you, strategically holding (and selling) your investment can help keep you in a lower income tax bracket<\/a> and reduce your capital gains tax.<\/p>\n","protected":false},"excerpt":{"rendered":" Mutual funds, bonds, and homeownership: all of these are great investment vehicles to ensure security for your future. But before you get ready to collect on any high-earning investments, it’s important to understand how investments are taxed, as well as how to make the most of your investments and avoid potential tax pitfalls. Bonds Government […]<\/p>\n","protected":false},"author":1,"featured_media":2437,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[19],"tags":[],"class_list":["post-2436","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-taxes-and-investments"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/posts\/2436","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/comments?post=2436"}],"version-history":[{"count":1,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/posts\/2436\/revisions"}],"predecessor-version":[{"id":11322,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/posts\/2436\/revisions\/11322"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/media\/2437"}],"wp:attachment":[{"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/media?parent=2436"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/categories?post=2436"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.irs.com\/en\/wp-json\/wp\/v2\/tags?post=2436"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}