Airing: Sunday, September 26, 2004
Are you interested in paying low taxes on your investments? Then maybe interest income should be shifted into dividends. Here to show us why making this change can pay big dividends is the always interesting Jim Lineweaver. Jim is founder of Lineweaver Financial Group.
Question: What is a dividend?
Answer: A dividend is a share of a company's net profits distributed by the company to a class of its stockholders. The dividend is paid in a fixed amount for each share of stock held.
Question: Do all companies distribute dividends?
Answer: Growth companies would likely want to re-invest any of their net profits and therefore not give out dividends. Certain companies have a history of distributing dividends.
Question: What investments generate dividend income? As opposed to interest income?
Answer: Interest income is what you receive off CDs, bank accounts, etc. Dividend income can come from stocks in companies that distribute dividends, mutual funds known for the same, from a partnership, S Corporation, Estate, or Trust, or from certain REIT investments.
Question: Why is investing in dividend income attractive?
Answer: The tax rate on dividends received by individuals from most domestic corporations and many foreign corporations has been reduced by the Jobs and Growth Tax Relief Reconciliation Act of 2003 in 15% for taxpayers whose top bracket exceeds 15%, and to 5% for taxpayers whose top bracket is 10% or 15%.
These more attractive tax rates are the same rates applicable to net long-term capital gains.
To get the benefit of the reduced rates, qualified dividends generally must be reported together with net long-term capital gains. The reduced rates apply to qualified dividends received after 2002 and before 2009.
Dividends are taxed at lower rates than interest. So getting rid of CDs and buying dividend paying stocks may cut your taxes, and leave you with more in your pocket. If we’ve peaked your interest, or if you’d like a free list of the top dividend paying companies, give Jim Lineweaver a call.
Jim Lineweaver is a registered representative of and offers securities through Walnut Street Securities, Inc. (WSS) Member NASD/SIPC.
Branch Office:
9050 Sweet Valley Drive,
Valley View, OH 44125
216-520-1711
WSS does not offer tax or legal advice.
Lineweaver Financial Group is not a subsidiary or affiliate of WSS.
Material discussed is for information purposes only and should not be the basis for any investment decisions.
