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Tax Tip of the Week
For the week of
June 9, 2003


Plan for lower investment taxes


There's good news if you have investment income from dividends or capital gains. The new tax law cuts the tax rate on both. It's worth doing a little planning to maximize your tax savings.

First, the rules. The maximum tax you'll pay on most dividends and long-term capital gains falls to 15% through 2008. You get an even better break if you're in the lower two tax brackets. Then you'll pay only 5% through 2007 and zero in 2008. The new rates apply to dividends received after January 1, 2003, and long-term capital gains realized after May 5, 2003.

Depending on your particular situation, these new rules offer real tax-saving opportunities. For example, it's worth planning the timing of any sales to make sure they're long-term gains and qualify for the lower rate. The strategy of shifting assets to a child or relative in the lower tax brackets could be attractive, especially if they can time their sales to occur in 2008 when the tax is zero. And you should consider whether investments in high-dividend stocks make sense for your situation. Remember, though, taxes should be only one element in your investment decisions.

Call our office if we can help with your tax planning.





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