Taxes on investment income help

[igal]

Hello,

In addition to the income from my job, I have income from my investments.  Some of my investments are professionally managed.  They do attempt to manage the portfolio in a tax efficient manner, however, I never know what to expect at the end of the year in terms of taxes I'll need to pay on dividends, capital gains, interest, etc.  The last few years, I've owed large amounts because of this.  I do have extra money withheld from my paychecks each pay period to try to get ahead of this, however, I have no system to try to estimate what will be owed and am flying blind.  Any advice on how to better manage this to avoid the large tax surprise at year end?   Thank you. 

[marctu]

Since you have not been able to estimate in the past based upon your answer, my suggestion would be to take the average of the investment gains over a period of your choosing and then pay the investment taxes associated with this average over the course of the year plus some percentage extra.    You can also look at the monthly dividends, interest, and capital gains each month and then attempt to estimate the investment income each month, though this would be time consuming.   Tax efficient investing for your and your advisor may mean different things as well.  You may want to have a conversation with the advisor of their efforts to limit the income items associated with your investments.

All the best,

Marc T.

TurboTax Live  Expert

28 Years of Experience Helping Clients