Some Facts To Bear In Mind
Margin Dividends Cost More!
If you buy stocks on margin, the dividends you earn from those stock holdings are not taxable at the lower 15% rate. They are taxed as ordinary income. That law was on the books last year, but the brokerage houses were not ready to distinguish between qualified dividends and nonqualified dividends... So this is just one more reason to avoid margin purchases.
Changes in Standard Deductions
The 2003 tax law raised the standard deduction to $9,500 in 2003 and to $9,700 in 2004.
Couples filing jointly with itemized deductions of less than $9,700 in 2004 should take the standard deduction for 2004 and defer paying expenses such as state taxes, mortgage interest, and charitable donations into 2005, when the total of your itemized deductions might be large enough to make itemizing worthwhile. By shifting expenses into alternating years, you can use your deductible expenses most efficiently.
Retirement Plan Distributions
If you turned 70-1/2 in 2004, you must begin to take required minimum distributions from IRAs and other tax-deferred retirement plans by April 1, 2005 (based on the amount in the account at year-end 2003). The second distribution must take place by December 31, 2005 (based on the year-end 2004 amount).
Note: If you take two distributions next year, the added income may push you into a higher tax bracket. The alternative is to act now to take one distribution in 2004 and the other in 2005. It may be wise to check with your tax advisor to see if this makes sense for you.
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If you buy stocks on margin, the dividends you earn from those stock holdings are not taxable at the lower 15% rate. They are taxed as ordinary income. That law was on the books last year, but the brokerage houses were not ready to distinguish between qualified dividends and nonqualified dividends... So this is just one more reason to avoid margin purchases.
Changes in Standard Deductions
The 2003 tax law raised the standard deduction to $9,500 in 2003 and to $9,700 in 2004.
Couples filing jointly with itemized deductions of less than $9,700 in 2004 should take the standard deduction for 2004 and defer paying expenses such as state taxes, mortgage interest, and charitable donations into 2005, when the total of your itemized deductions might be large enough to make itemizing worthwhile. By shifting expenses into alternating years, you can use your deductible expenses most efficiently.
Retirement Plan Distributions
If you turned 70-1/2 in 2004, you must begin to take required minimum distributions from IRAs and other tax-deferred retirement plans by April 1, 2005 (based on the amount in the account at year-end 2003). The second distribution must take place by December 31, 2005 (based on the year-end 2004 amount).
Note: If you take two distributions next year, the added income may push you into a higher tax bracket. The alternative is to act now to take one distribution in 2004 and the other in 2005. It may be wise to check with your tax advisor to see if this makes sense for you.
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posted by Bob Moser at
3:42 PM
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