Commodities Investments: How to Identify Your Tax Bracket
Taxes have a direct impact on how much of the assets that you have invested in commodities you get to keep at the end of the day. You must understand the implications that taxes can have on your portfolio.
How much you pay in taxes is based on your tax bracket.
|Annual Taxable Income||Tax Level|
This tax rate schedule is known as Schedule X, and it applies to you if you’re filing your tax return as a single person. The Internal Revenue Service (IRS) has a number of different schedules, depending on how you’re filing your returns.
Schedule Y-1: Married and filing jointly or qualifying widow(er)
Schedule Y-2: Married and filing separately
Schedule Z: Head of household
Tax rates change depending on which schedule you file under. Visit the IRS website or talk to your accountant to find out the tax rates under the different schedules. Because tax rates may change on an annual basis, inquire about these tax issues regularly.
Where you live can also have a big impact on how taxes affect your investments. Did you know that a number of states within the continental United States don’t have income taxes? As a resident of one of these states, you pay federal income taxes but no state income taxes, so no one will blame you for considering relocation.
These states have absolutely no income tax, which means you get to keep more of what you earn!
Out of the nine states that don’t have personal income taxes, Florida does place a tax on intangible personal property. Thus, items such as stocks, bonds, and mutual funds are subject to taxes. Also note that New Hampshire and Tennessee both tax income earned on interest and dividends.
Investing in commodities, as in any other asset class, has tax implications. You should talk to your accountant before you invest in commodities. Knowing the tax implications before you invest may save you a lot of heartache down the road.