Tax efficient dividends, derivatives, stock

Forum|Forum|1 year ago
July 16, 2025
1 reply
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How can I determine which stock, dividends and derivatives will be the most tax efficient investments with regard to end of the year taxes

Ask the Experts - Investments - July 2025

Cindy4 12

Employee Tax Expert

To determine the most tax efficient investments it's important to understand how they are taxed. Long term stocks are taxed at the more favorable capital gains rate, while short term are taxed at ordinary income rates. Qualified dividends are taxed at the same preferential rates as long-term capital gains, as opposed to ordinary dividends being taxed at your marginal rate.

Some derivatives like Section 1256 contracts are treated 60% long term and 40% short term and can provide some tax efficiency due to the fact some short term investments may get the preferential long term treatment. Because derivatives depend on the underlying source it may be best to look for a broker well versed in this area.

Here are some tools that may help your planning.

Hope this helps!

Cindy

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