Tax Law And Your Investments: Don’t Lose Your Money

You’ve been smart with your money and you’ve invested wisely throughout the year. That’s a wonderful thing, but now you’ve got to figure out how to handle taxes on all this additional income and/or savings. It can be tricky, due to the complex IRS laws, however, a professional tax lawyer can help you navigate the complicated world of tax law and investments. As you start to figure out the taxes you’re going to be held responsible for, here are a few tips from the professionals to help you get started. Of course, be sure to consult your accountant or tax lawyer before you make any big decisions about your investments.


Understanding What You Pay Taxes On

One of the first steps to successful investing is to get a firm understanding of what you actually pay taxes on. There are several different things that the IRS will be looking at, specifically any interest-bearing investments or dividend-paying investments. So basically, if your investments pays any type of dividend or interest, you are responsible for the tax on that money. You can also be taxed on things like capital gains or any foreign investments as well, but not all investment income is taxed at the same rate or in the same way.


How Much Tax You’ll Pay

Since every type of income is different, the amount of tax you’ll pay on that income varies depending on many factors. The IRS looks at the type of investment you made and the specific tax laws in the area that you live. Many investment opportunities are also held in a tax-sheltered plan, so that can have a big impact on the amount of tax you’ll be responsible for, plus your income has a lot to do with tax amounts as well. Suffice it to say, tax laws around investments can be complicated, so getting the support of a qualified tax lawyer is crucial to ensuring you handle your money correctly.


Tax-Sheltered Plans

There are some types of investments that are called “tax-sheltered” plans. Basically that means you don’t pay any tax on what you earn, but that’s only while your money is in the actual investment or plan. However, if you take any money out at all, that income is fully taxed as taxable income. A few examples of these types of plans are Registered Retirement Savings Plans, Registered Retirement Income Funds, Registered Education Savings Plans and Permanent Life Insurance Plans. There are also some tax-free savings accounts which let you save money totally tax-free for any goal you wish.


Capital Losses

Another way to reduce the amount of taxes you owe due to your investments is through any capital losses. Basically, once the tax season rolls around, you will need to add up all of your gains and losses from all your investments. If, when the math is done, you have a gain to report, then you will be taxed on that amount. If you lose money, however, then you declare a net loss and that cannot be used to offset your other sources of income. Be sure to consult your accountant or tax lawyer for some help though, because you can carry a net capital loss back for three years or carry it forward indefinitely. This one definitely gets complicated, so professional help will be crucial.

Deborah Flomberg is a theater professional, freelance writer and Denver native. Her work can be found at


Leave a Reply

Fill in your details below or click an icon to log in:

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

More From CBS Los Angeles

KNX 1070 Newsradio

Listen Live