Investment Returns and Tax Treatment
Chapters in this video
What this video covers
- Why in-state municipal bond interest is triple tax-free, and how U.S. Treasury and agency securities (Ginnie Mae, Fannie Mae, Freddie Mac) split on federal versus state taxation
- How a return of capital distribution shows up in Box 3 of a 1099-DIV, why it is not taxable when received, and how it reduces cost basis dollar for dollar
- The ordinary income bucket (taxable bond interest, non-qualified dividends, real estate investment trust (REIT) dividends, short-term gains) versus the preferential capital gains bucket (0%, 15%, 20%)
- Why the holding period dividing line is one year and one day, and why exactly 365 days is still a short-term capital gain taxed at ordinary rates
- How the net investment income tax (NIIT) adds a 3.8% surtax at modified adjusted gross income (MAGI) thresholds of $200,000 single, $250,000 joint, $125,000 married filing separately
- Why tax-exempt municipal bond interest is excluded from the NIIT calculation entirely
- Why the NIIT thresholds are not indexed for inflation and have been frozen since 2013
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