BDC and Mortgage REIT Income Is Taxed Differently Than a Bank Dividend. Here's Where to Hold Each.
If you make the right decision on where to hold certain investments, you can minimize how much you pay Uncle Sam.
Investing involves more than simply selecting strong stocks and bonds, and holding them long-term. Tax implications of investments should also be considered. Corporate bonds are fully taxable, while municipal bonds can avoid tax. Retirement accounts offer tax-free status for certain investments. Ultra-high-yield mortgage REITs and business development companies (BDCs) require attention to tax placement.
The taxes you pay fund government services. Taxes apply to income earned. Dividends are taxed differently. REITs and BDCs pass income to shareholders as dividends, which are taxed at regular rates, not corporate rates. AGNC Investment (NASDAQ: AGNC), Annaly Capital (NYSE: NLY), Main Street Capital (NYSE: MAIN), and Ares Capital Management (NASDAQ: ARCC) offer high yields.
Roth IRAs and Roth 401(k)s allow tax-free withdrawals of after-tax money. Placing certain investments in Roth accounts can minimize tax burden.
Written by urgent.news from Yahoo Finance's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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