SumitA recap is a quick summary of what we did over the past year and what we think we can do in the near future. So, if you’re looking for something to take your mind off of the fact that you just lost your job, you are going to be in a pickle.
The last time you looked, your employer had given you a nice fat retirement check. But it’s not really yours, it’s your investment. The time between when they gave you your paycheck and when they cut it off, you are still paying an interest on your investment. That’s a dividend you should be taking some action on.
Dividends are a great way to get your financial life in order, but they are also a great way to waste your time. The reason that dividends work is because they are an investment, and an investment has a finite amount of time to pay off. In the case of dividend investing, this amount is often referred to as the “maturity,” and if you reinvested your dividends back into your company, you had an extra year to pay off your investment.
To recap, dividends are a way for companies to pay a special dividend tax that helps cover their interest costs. If you were to reinvest this money at a stock exchange, you could be required to pay the capital gains tax on the same dividends you received. In the case of dividends reinvested into a company, there is no tax, so you can be taxed on the same money you just received as you would have been if you had reinvested it.
As far as I know, the IRS doesn’t have any guidelines about when dividends are deductible, but I would definitely guess that any dividends the company paid to its shareholders over a certain time period are considered to be taxable income. If you didn’t earn any dividends, you definitely have to pay income tax on any amount you receive in capital gains.
The IRS defines capital gains as any profit gained on the sale of a security. As such, the capital gains tax applies to dividends you receive, but not to any future dividends you receive in excess of the money you have already earned. This is because if you reinvest any portion of your capital gains in another company in which you earn income, then the capital gains tax would be applied to that income.
The capital gains tax on dividends is a big reason why many investors shy away from dividend investing. Why would you reinvest dividends in another company? Because the tax on capital gains will be applied to that income. If you reinvest dividends in another company, then you aren’t keeping the tax on profits reinvested in the new company.
That’s what dividend investing is all about. Capital gains tax, reinvested dividends, and reinvested dividends just to build another company. And as it turns out, if you reinvest in another company in which you earn income, then you are not keeping the tax on profits reinvested in that new company.
What happens when you reinvest dividends in a company which you owned before you invested? You are not keeping the tax on profits you made at that company.
