HOW THE NEW TAX LAWS MAY AID YOUR INVESTMENT STRATEGY
Submitted by Greg DelongCourtesy of Edward Jones
President
Bush signed tax legislation into law on May 17. These new laws may have a
big impact on your investment strategies over the next few years.
Extension of the 15% maximum tax rate on dividends and capital gains though 2010.
This extension gives you some incentive to look for high-quality dividend-paying stocks and to hold your stocks for at least one year - long enough to receive the best capital gains rate when you sell.
Removal of restrictions on transfers to Roth IRA
Starting in 2012, you can roll your traditional IRA into a Roth IRA, regardless of your income level. The amount you transfer will be included in your gross income, so you'll have to pay taxes on it, but you can spread the taxes over two years if you make the rollowver in 2010.
A traditional-to-Roth rollover may benefit you in that qualified withdrawals from a Roth IRA are not taxable. And you aren't required to start taking distributions from your Roth IRA at age 70 ½, as with a traditional IRA and 401 (k).
Increased alternative minimum tax (AMT) exemption.
The new tax bill raises the amount of the AMT exemption to $62,550 for joint filers, $42,500 for singles and $31,275 for married persons filing separate returns, but only for the 2006 tax year.