Just how is your investment income taxed- A few quick reminders!

It's that time of year again....TAX TIME! So just how are your various distributions taxed by Uncle Sam? Here are a few quick reminders...

1) Tax-deferred retirement accounts (traditional IRA and 401(k)) are taxed at your ordinary income rates. Remember- RMDs (required minimum distributions) are in force at the age of 72 for these types of retirement accounts. You must be age 59.5 to take distributions penalty free.

2) Roth IRAs- withdrawals are tax-free provided you are at least 59.5 and held the account for at least 5 years. (Remember- you paid these taxes up front!)

3) Annuities- If you have a traditional IRA annuity, the entire distribution is taxed as ordinary income. If you own an annuity outside of a traditional retirement account, you only owe taxes on the earnings and not the principal.

4) Social Security- Depending on your "provisional income" you may be taxed on up to 85% of your social security benefits. If provisional income is less than $32,000 for married couples filing joint, the SS benefit is tax-free.

5) Capital Gains- The LT-capital gains rates are 0%, 15%, and 20%. LT figures come into play if you held an investment for MORE THAN one year. If you held the investment for one year OR LESS, the gains are ST and taxed at ordinary income tax rates.

Keep these basic tips in mind when taking distributions from your various accounts and you won't be surprised come tax time! Remember to consult a financial professional for more in depth details regarding the reminders and more. #taxes #RMD #capitalgains #baltimore

-Your Friends at Red Oak Financial Group