Tax Implications of Common Investment Strategies
Understanding the tax implications of your investment strategy is as important as the strategy itself. This article is a follow up to “Want a Great Retirement”. That article went into the pros and cons of common retirement income strategies. This article will go into the tax implications of those common investment strategies. Buy individual bonds There are three main tax structures for bonds: Treasuries are taxed at the federal level but usually avoid state income taxes.Municipals avoid federal tax and usually avoid state income tax if they were issued from the state you reside in. For example, if you live in New York and buy Ohio muni’s, New York will make you pay state income tax on that income.Corporate bond income is taxed as ordinary income with no special treatment. The ideal scenario…
