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previously taxed dollars= dollars not taxed
on the sell, withdrawal or liquidation of a capital asset
or
GOOGLE INC.
$ 10,000
$ 40,000
Purchase Price
Selling Price
$ 30,000 Capital Gain
BIG BANK SAVINGS ACCOUNT
$ 10,000
$ 20,000
Deposits
Withdrawal
$ - 0 - Capital Gain
$ 10,000 Interest
Cost Basis / Tax Basis = $10,000
Cost Basis / Tax Basis = $20,000
INVESTMENT TAXATION
INVESTMENT TAXATION
GOOGLE INC.
$ 10,000
$ 40,000
Purchase Price
Selling Price
$ 30,000 Reportable Capital Gain
BIG BANK SAVINGS ACCOUNT
$ 10,000
$ 28,000
Deposits
Withdrawal
$ - 0 - Reportable Gain on Withdrawal
$ 18,000 Interest
Cost Basis / Tax Basis = $10,000
Cost Basis / Tax Basis = $20,000
MUTUAL FUND INC.
$ 10,000
$ 70,000
Investments
Liquidation
$ 40,000 Reportable Gain
$ 5,000 Dividends Cost Basis / Tax Basis= $30,000
$ 15,000 Capital Gains Distributions
previously taxed dollars=
dollars not taxed on the sell ,
withdrawal or liquidation of a capital
asset
or
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
+ Wages
INCOME
+ Interest+ Dividends+ Capital Gain Income+ IRA Distributions+ 401(k) Distributions+ Annuity Distributions+ Real Estate IncomeADJUSTMENTS- HSA Contributions- SEP Contributions- IRA Contributions- Itemized Deductions- Personal Exemptions
- 401(k) Contributions
= Taxable Income
INVESTMENT TAXATION
Health Savings Account
S.E.P. Contributions
I.R.A. Contributions
Savings Account /CD
$25,000
$5,000
$30,000
Tax on Withdrawal
$0
Contribution
Interest
- Ordinary Inc
- Ordinary Inc
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Municipal Bond
$25,000
$5,000
$50,000
$20,000
$20,000
Capital Gain
Contribution
Unrealized Gain
Interest
- Ordinary Inc
- Tax Exempt
Tax on Liquidation
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
Bond
$25,000
$5,000
$50,000
$20,000
$20,000
Capital Gain
Contribution
Unrealized Gain
Interest
- Ordinary Inc
- Ordinary Inc
Tax on Liquidation
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
Stock
$25,000
$10,000
$55,000
$20,000
$20,000
Capital Gain
Contribution
Unrealized Gain
Dividend
- Ordinary Inc
- Cap Gain
Tax on Liquidation
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
Mutual Fund
$25,000
$10,000
$75,000
$20,000
$20,000
Capital Gain
Contribution
Unrealized Gain
Dividend
- Ordinary Inc
- Cap Gain
Interest - Ordinary Inc
Cap Gain Dist
- Cap Gain
$5,000
$15,000
Tax on Liquidation
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
Annuity
$25,000
$10,000
$75,000
$50,000
$20,000
Ordinary Income
Contribution
Unrealized Gain
Dividend
- Ordinary Inc
Interest
Cap Gain Dist
$5,000
$15,000
Tax on Liquidation
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
IRA / 401(k)
$25,000
$10,000
$75,000
$75,000
$20,000
Ordinary Income
Contribution
Unrealized Gain
Dividend
Interest
Cap Gain Dist
$5,000
$15,000
Tax on Liquidation
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
Roth IRA 401(k)
$25,000
$10,000
$75,000
$0
$20,000
Contribution
Unrealized Gain
Dividend
- Ordinary Inc
Interest
Cap Gain Dist
$5,000
$15,000
Tax on Liquidation
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
HSA
$25,000
$10,000
$75,000
$20,000
Contribution
Unrealized Gain
Dividend
Interest
Cap Gain Dist
$5,000
$15,000
$0
Ordinary Income
If Qualified Medical Expense
$75,000
Tax on Liquidation
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
Life Insurance
$25,000
$10,000
$75,000
$20,000
Contribution
Unrealized Gain
Dividend
- Ordinary Inc
Interest
Cap Gain Dist
$5,000
$15,000
$0
If Withdrawn - Ordinary Income
If Borrowed From Cash Value
$50,000
Tax on Liquidation
INVESTMENT TAXATION
1. Savings Account / CD2. Municipal Bond3. Bond4. Stock5. Mutual Fund6. Annuity7. IRA / 401(k)8. Roth IRA 401(k)9. HSA10. Life Insurance
Black Border = Ordinary Income TaxedWhite Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
+ Wages
INCOME
+ Interest
Municipal Bond Interest
+ Dividends
+ Capital Gain Income
+ IRA Distributions
+ 401(k) Distributions
+ Annuity Distributions
+ Real Estate Income
ADJUSTMENTS
- HSA Contributions
- SEP Contributions
- IRA Contributions
ADJUSTED GROSS INCOME
- Itemized or Standard Deductions
- Personal Exemptions
= TAXABLE INCOME
Black Border = Ordinary Income Taxed
White Border = Capital Gains TaxedNo Border = Hasn’t Been Taxed
INVESTMENT TAXATION
TAXATION OF INVESTMENTS
Contribution Income Capital Gains
Taxed in year earned
Life Insurance Investment
Annuity
After tax dollars
Stocks / Bonds / Savings Accounts / Certificates of Deposit / Mutual Funds
Municipal Bonds
Traditional IRA and 401k
ROTH IRA and ROTH equivalent 401k
Health Savings Accounts (HSA)
After tax dollars
After tax dollars
Pre-tax dollars (no federal, state, or FICA tax)
Pre-tax dollars
After tax dollars
After tax dollars
Tax exempt
Interest & Dividend – ordinary income tax rates
Capital Gains – capital gains tax rates
Tax deferred
No tax on withdrawal
Tax deferred
Tax exempt if borrowed from policyTax deferred - if withdrawn taxed as ordinary income
Tax exempt if used for qualified medical expenses
Tax deferred if used for non-medical expenses - taxed as ordinary income
Taxed as Capital Gain
Taxed as Ordinary Income
No tax on withdrawal
Tax exempt if borrowed from policyTax deferred - if withdrawn taxed as ordinary income
Tax deferred if used for non-medical expenses – taxed as ordinary income
Taxed as Capital Gain
Tax exempt if used for qualified medical expenses
INCOME
+-ADJUSTMENTS
=AGI - Deductions
- Personal Exemptions
= TAXABLE INCOME
Taxed as Ordinary Income