Tax & Accounts
What you keep after tax often matters more than what you earn, and this category covers the rules and accounts that decide it.
The explainers run from the mechanics of investment tax, capital gains and the short versus long-term split, cost basis, tax-loss harvesting, the wash-sale rule, and qualified versus ordinary dividends, to the accounts that shelter returns: taxable brokerage versus tax-advantaged, traditional and Roth IRAs, the 401(k) and its Roth and mega-backdoor variants, the HSA, and UK ISAs and SIPPs.
The 1099 reporting forms and asset location tie it together.
Investing With Purpose keeps to mechanics rather than advice, since specific limits change yearly.
The payoff is reading your own tax forms, choosing the right account, and seeing how tax quietly compounds or erodes long-run results.
Dividends fall into two tax buckets. Qualified dividends are taxed at the same preferential rates as long-term capital…
US tax law divides capital gains into two categories based on holding period. A gain on an asset held one year or less…
IRAs and 401(k)s are tax-advantaged accounts that let you save for retirement while deferring or eliminating tax on the…
A capital gain is the profit you make when you sell an asset for more than you paid for it. How that profit is taxed…
Two investors can receive the exact same dividend and pay very different taxes on it. The difference comes down to…
Where you hold an investment can matter as much as what you hold. The same fund can grow tax-free, tax-deferred, or…
A traditional IRA is the original tax-advantaged retirement account: contribute pre-tax money today, let it grow…
A Roth IRA flips the traditional retirement bargain: you pay tax on the money going in, and in exchange everything that…
The 401(k) is the workhorse of American retirement saving: an employer-sponsored account with high contribution limits,…
UK investors have two main tax-efficient wrappers for building wealth: the Individual Savings Account (ISA) and the…
Tax-loss harvesting is the practice of selling a losing investment to realize the capital loss, using that loss to…
The wash sale rule is a US tax provision that disallows a capital loss when you buy back a substantially identical…
When you sell part of a stock position built over several purchases, the shares you choose to sell determine your…
Asset location is the practice of placing each of your investments in the account type where it is taxed the least.…
The Roth-versus-Traditional question is really a question about when you want to pay your taxes: now, or in retirement.…
An RMD is the minimum amount the IRS makes you withdraw from a tax-deferred retirement account each year once you hit…
Step-up in basis resets the cost basis of inherited property to its value on the date of the previous owner's death.…
Form 1099-DIV is the tax document your brokerage or a company sends when you receive dividends or certain other…
Form 1099-INT is the tax document that reports interest you earned during the year from banks, brokers, and bond…
Form 1099-B is the tax document your broker sends when you sell stocks, bonds, funds, or other securities during the…
Form 1099-OID is the tax document that reports original issue discount, a form of interest you earn on bonds bought for…
Form 1099-MISC is the tax document a business sends to report assorted payments that do not fit the more specialized…
Form 1099-NEC is the tax document a business sends to report what it paid an independent contractor or other…
Form 1099-K is the tax document that reports money you received through payment cards and online payment platforms. It…
Form 1099-R is the tax document that reports money taken out of a retirement account, pension, annuity, or insurance…
Form 1099-S is the tax document that reports the gross proceeds from selling or exchanging real estate. It tells you,…
Schedule K-1 is the tax document a partnership sends each partner to report that partner's share of the partnership's…
A Schedule K-1 S corporation form is the document an S corp sends each shareholder to report that shareholder's share…
A Schedule K-1 trust beneficiary form is the document a trust or estate sends each beneficiary to report that…
Schedule D capital gains reporting is how you net all your investment gains and losses for the year and carry the…
Form 8949 capital gains reporting is the detail sheet where you list each sale of a capital asset with its purchase…
Form 8606 nondeductible IRA basis tracking is how you tell the IRS which dollars in your traditional IRA were already…
Form 5498 IRA contributions reporting is the information return your IRA custodian files with the IRS to record what…
Form W-8BEN is the certificate a foreign individual gives a US payer to confirm non-US status and, where a tax treaty…
Form W-8BEN-E is the certificate a foreign entity gives a US payer to document its tax status for withholding and FATCA…
Form W-9 is the request a US payer sends to a US person to collect a correct taxpayer identification number, or TIN, so…
The Section 1411 NIIT is a 3.8 percent surtax on net investment income for individuals, estates, and trusts whose…
Section 199A gives owners of pass-through businesses a deduction of up to 20 percent of their qualified business…
When you have bought the same stock at different prices over time and then sell only part of your position, which…
The Health Savings Account is the only account in the US tax code that offers three tax breaks at once: a deduction…
Section 1202 of the Internal Revenue Code lets non-corporate investors exclude a portion of federal capital gains tax…
Section 199A gives individual owners of pass-through businesses a deduction of up to 20 percent of qualified business…
A Section 1031 exchange lets an investor swap one piece of real property used in a trade, business, or held for…
A Qualified Opportunity Zone (QOZ) is a census tract designated by the Treasury where investors can defer, reduce, and…
Incentive stock options (ISOs) and non-qualified stock options (NSOs) look similar on a grant letter but produce very…
Carried interest is the share of investment fund profits that a fund manager receives without contributing proportional…
A passive foreign investment company (PFIC) is a foreign corporation that earns most of its income from passive sources…
The foreign tax credit lets US taxpayers reduce their US income tax by the amount of income tax paid to a foreign…
The wash sale rule in Internal Revenue Code Section 1091 disallows a loss on the sale of stock or securities when the…
Section 475(f) of the Internal Revenue Code lets qualifying securities and commodities traders treat their trading…
Section 1256 of the Internal Revenue Code forces a mark-to-market on certain derivative contracts and then splits the…
Section 988 of the Internal Revenue Code governs the U.S. tax treatment of foreign currency gains and losses on most…
The Net Investment Income Tax is a 3.8 percent federal surtax on the lesser of a high-earning household's investment…
The AMT is a parallel federal income tax system that strips out selected deductions and preferences, applies its own…
A GRAT is an irrevocable trust that transfers the appreciation on contributed assets to beneficiaries with minimal gift…
An estate freeze locks the current value of an asset in the owner's estate while shifting future appreciation to the…
A dynasty trust is an irrevocable trust designed to hold wealth for multiple generations while avoiding federal…
Cross-border wealth transfer introduces three overlapping tax systems: U.S. federal estate and gift tax, the…
Employee Stock Ownership Plans (ESOPs) are qualified retirement plans that invest primarily in employer securities.…
Form 6251 alternative minimum tax is the worksheet that recomputes your income under a parallel tax system designed to…
Form 8990 business interest limitation is the calculation that determines how much net interest expense a business can…
Form 1116 foreign tax credit is how an individual, estate, or trust claims a credit for income taxes paid to foreign…
Form 8621 PFIC reporting is required when a US person owns shares of a passive foreign investment company, most…
Form 8938 FATCA reporting is how an individual tells the IRS about specified foreign financial assets, such as accounts…
The FBAR FinCEN Form 114 is the report a US person submits to the US Treasury to disclose foreign bank and financial…
The Form 8832 entity classification election lets an eligible business choose how it is taxed at the federal level.…
The Form 2553 S corporation election lets a small business be taxed as a pass-through entity instead of a regular C…
Form 5471 foreign corporation reporting is the information return certain US persons file to report their ownership of,…
Form 5472 foreign-owned US corporation reporting is the information return that a 25 percent foreign-owned US…
Form 8865 foreign partnership reporting is the information return US persons file to report their interests in certain…
Form 8858 is the IRS information return that certain U.S. persons must file when they own a foreign disregarded entity…
Form 3520 is the annual return a U.S. person files to report transactions with foreign trusts and the receipt of…
Form 3520-A is the annual information return a foreign trust files when it has a U.S. owner under the grantor trust…
GILTI, global intangible low-taxed income, is a U.S. tax on the excess foreign profit of a controlled foreign…
FDII, foreign-derived intangible income, is a deduction that lowers the U.S. tax rate on income a domestic corporation…
BEAT, the base erosion and anti-abuse tax, is a minimum tax aimed at large corporations that strip U.S. taxable income…
Subpart F income is a set of categories of a controlled foreign corporation's earnings that U.S. shareholders must…
A Section 962 election lets an individual who is a U.S. shareholder of a controlled foreign corporation choose to be…
The Section 1202 QSBS exclusion is one of the most powerful breaks in the tax code, letting founders and early…
Section 1244 small business stock is a special class of corporate stock that lets the original individual investor…
A Section 1244 ordinary loss is the tax benefit that converts a loss on qualifying small business stock from a capital…
A Section 83(b) election is a choice to pay ordinary income tax on restricted stock at the moment it is granted, based…
A Section 83(i) stock deferral lets eligible employees of private companies postpone federal income tax on stock from…
The Section 409A deferred compensation rules control how and when nonqualified deferred pay can be set aside and paid…
The Section 280G golden parachute tax penalizes oversized executive payouts tied to a change in company control, often…
A wash sale of substantially identical securities disallows a tax loss when you sell a security at a loss and buy…
The Section 1092 straddle rules stop traders from booking a tax loss on one side of an offsetting position while the…
The Section 1259 constructive sale rule treats certain hedges of an appreciated asset as if you had actually sold it,…
A Roth 401(k) is the after-tax sibling of the regular 401(k), offering tax-free growth inside a workplace plan. The…
The backdoor Roth IRA is a legal workaround for high earners who are barred from contributing to a Roth directly…