News from the web:
While you’re collecting your tax and investment records for your tax return this year, it’s a good idea to review your asset allocation and location strategies with respect to tax-advantaged accounts, including IRAs, 401(k)s, and after-tax investment accounts. You can decrease the taxes you pay on your investment returns with two strategic moves that can increase the amount of retirement income you can keep after paying federal and state income taxes. Here I’ll describe the first move; stay tuned for my post tomorrow that describes the second move.
Shift from actively managed to index funds
If you invest in after-tax mutual funds, you’ve most likely got a good pile of Forms 1099-DIV. This form reports your total taxable dividends in box 1a, qualified dividends in box 1b and taxable capital gain distributions in box 2a. You might be confused by this last amount: If you didn’t sell your mutual fund during 2011, why are you getting taxable capital gain distributions? The answer? Your mutual fund company sold securities during the past year at a gain, and the mutual fund is required to attribute a portion of these gains to your account.
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