A Full Service CPA Firm

What's New:

Talk to your college student about finances

A recent study by the American Institute of Certified Public Accountants shows a wide gap between how well college students think they handle money and how well they actually handle money. The survey also found that nearly a third of students taught themselves how to budget.

The good news is that 99% of surveyed students said developing money management skills was “extremely” or “very” important, and 84% said they were “extremely” or “very” interested in learning how to make better financial decisions.

It’s never too late to teach your kids how to handle finances. Involve them in family budgeting discussions and talk about credit cards and student loan debt. Share your knowledge – and your mistakes. Help your kids take ownership of their future by arming them with sound money skills.

Ex-dividend dates can bring a tax surprise to the unwary

Are you shopping for a mutual fund? Make sure you understand ex-dividend dates to avoid a surprise at tax time.

Unlike stocks, a mutual fund is required to distribute its annual income to shareholders. The distributions are often taxable in the form of interest, dividends, and capital gains. The ex-dividend date is the day when shares you purchased no longer have the right to receive the scheduled distribution.

Why does the ex-dividend date matter? If you buy shares of a fund before the ex-dividend date, you will receive a taxable distribution — meaning you’ll pay taxes on income earned by the fund before you owned it. Since the price of the fund shares before and after a distribution reflect the amount of the dividend, you’re converting part of your purchase price into income.

What if you’re selling your shares? If you’ve owned appreciated shares for more than a year, selling them could produce income taxed at favorable long-term capital gain rates, as opposed to receiving distributions taxed at ordinary tax rates.

If you own a mutual fund in a qualified retirement account, the annual distribution will not be subject to immediate taxation. In that case, the timing of your purchase is of less importance from a tax standpoint.

Mutual fund investing can be advantageous if you know the rules. Give us a call for guidance on the tax implications of your investments.