Markets expect that building green portfolio in Trump tax era will be easier as Donald Trump’s policies would lower taxes and decrease almost all kinds of investment income. How to take the advantage of possibly historically low tax rates in 2017?
6 December, AtoZForex – If the plans come to pass, people who live off their investments, like retirees. They have to worry less about taxes and they’ll have more options, especially in the bond market.
Building green portfolio in Trump tax era
Under the plan, marginal tax rates would be consolidated and decreased to 12 percent, 25 percent, and 33 percent. On the investment side, income from capital profits, interest and dividends would be taxed at 50 percent of those rates, according to tax experts and analysis of the plans. Right now interest and regular dividends are taxed at your normal rate and the federal capital gains tax starts at 20 percent. Here are the four ideas for your portfolio to take advantage of low tax rates for a few years.
Seek investment vehicles with steady high income
The investments that grow more appealing are REITs; high-dividend stocks, like energy companies and utilities; and master-limited partnerships. If investors avoid those investments due to minimizing taxes, they might want to take another look. Their value might also hike in the market as they are more in demand. Thus, the long-term investor might earn the profit in the long run.
All kinds of bonds, including Treasuries, could seem more appealing because the interest they produce is taxed at only 50 percent of your marginal rate.
Choose to pay taxes on retirement savings
Money can only be taxed once, so if someone pays taxes on it under the new, lower rates won’t pay taxes later when rates could be higher. One of the winning investment vehicles in a low-tax environment is the Roth IRSA, in which investors pay taxes now and don’t owe them until withdrawing money.
Look for opportunities in lower business taxes
Investment taxes are set to get an overhaul; so are business taxes. As the majority of people are self-employed, a tax cut on income that flows pass through entities, like partnerships and sole proprietorships, can be an advantage. Moreover, A rate of 50 percent of the marginal tax rate is on the table.
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