INVESTMENTTAXATION

INVESTMENT TAXATION

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