Seven Ways To Slow The 'Tax Drag' On Investments
It's not how much you earn that counts; it's how much you keep. Yet for many investors, a combination of taxes can siphon off close to half of their investment earnings. Some of what you earn from your investments may be taxed at ordinary income rates up to 39.6% on the federal level, plus you could be hit with a 3.8% tax on "net investment income" (NII) as well as state and local income taxes.
What can you do? Consider these seven approaches:
1. Know the benefits in the law. Congress has had more than 100 years to tinker with the tax code, which now is full of provisions designed to protect and enhance the interests of investors. The complete list, too long to enumerate here, includes tax breaks for investments in real estate, employer-based retirement accounts and IRAs, and life insurance, as well as others such as oil and gas partnerships.
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