A Retirement Income Tax Breaks from Low-Taxed Dividends - Finance

Income from financial savings assist retirees fill out their retirement income requirements. Traditionally, the well-to-do have chosen municipal bonds for their tax-free income. But because of their tax-free condition, municipal bonds typically pay a considerably lower rate of interest than ?taxable? corporate bonds. However whether well-to-do or not, all retired persons require tax breaks. Some other income-based investments are generally taxed at normal income rates (up to 35%). However, the tax breaks on qualifying dividends makes high-dividend shares an attractive alternative for both average and wealthy retirees.

Ordinary dividend income is included to your other gross income. Following deductions and exemptions, your resulting ?taxable? income is subject to taxes at the income tax rate for your filing status. These tax rates have tax brackets that run from 10% to 35% based on how much after tax income you have.

However for 2012 you may be able to tax advantage of one of the great tax relief. Tax rates on qualifying dividend income? (as well as net long-term capital gains) might be as low as 0%, depending on whether your taxable income tax rate drops below the 25% bracket. The table shows the taxed income for the filing status that places you at the 25% income rate. Beneath that taxable income, your qualified dividends are tax-free; at or above it they are taxed at only 15% (These rates currently continue through 2012).
When do normal dividends become ?qualifying? dividends?

For a stock dividend to be taxed like a qualified dividend, you must maintain the stock for more than sixty times during the 121-day period that begins sixty days before the ex-dividend date. This just prevents you from purchasing the stock ?ex-dividend? when its cost temporarily falls due to the loss dividend. Put simply, so long as you are not a short-term investor, your stock returns will likely be qualifying dividends and therefore qualify for the tax break.

Find high-paying stock dividends for the investment income
Preferred stocks and high-dividend paying stock may function as an exceptional source of retirement income. Remember that stock payouts aren?t as secure as income from fixed income investments. In case you do purchase stocks for income, keep them long enough to make their dividends ?qualifying?. Then pay either no tax or only 15% through 2012.

?

Investment tax rates versus Income tax rate?
Tax rate on net long term capital gains and qualified Dividends	If ?taxable? Income tax rate bracket is:
0%	Less than 25%
15%	At 25% or higher
Filing Status determines where 25% income tax begins
For filing status	25% Income tax rate begins at
Single:	$35,350
Married Filing Jointly:	$70,700

Related Posts:

kombucha tea separation of church and state dale earnhardt oscar predictions oscars nba all star game 2012 academy awards 2012 nominations