We discussed tax on gold investments here, now final part of tax-wise about investment.
Part 7, Tax on MUNIs, MLPs, and REITs
Part 7, Tax on MUNIs, MLPs, and REITs
- Corporate bond income is taxed at ordinary income rates
- Treasury bond interest is subject to Federal tax, but not state taxes.
- Municipal bonds are free from Federal tax. If you live in the state that issued the bond, the interest you receive is exempt from Federal, State, adn Local taxes.
- Muni funds that buy bonds from all states - your fund company will let you know what percentage of your interest is free from state and local taxes.
- Dividends paid by REITs and MLPs are taxed at ordinary income tax rates (there is NO qualified dividend from REITS or MLPs). Under the new tax law, investor can deduct 20% of their REIT and MLP income as a qualified business income deduction. To qualify for the full deduction, among other requirements you need taxable income below $315,000 for joint return or $157,000 for other taxpayers. You can deduct even you don't itemize.
- Not all MLP payouts are taxable - if the payout is a return of capital which you won't owe tax on it. Your MLP's K1 tax form should tell you how much of your MLP's payout is taxable and what tax treatment it ultimately gets.
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