By Ella Vincent From Kiplinger’s Personal Finance
For many, funding a 401(k), IRA or other retirement account is the first order of business as they save for long-term goals, and for good reason: These accounts offer significant tax benefits. But tax-advantaged retirement accounts come with restrictions on how much you can contribute and at what age you can make withdrawals without penalty. A taxable brokerage account adds some flexibility to your overall investment mix.
Tax Treatment and Withdrawal Rules
In a taxable brokerage account, you pay tax on interest, dividends and capital gains in the year you receive them. Capital gains from investments held for a year or less are generally taxed at your ordinary income rate, which can be as high as 37 percent, while gains on assets held for more than a year are taxed at rates ranging from zero percent to 20 percent, depending on your income. There are no tax deductions for contributions to taxable brokerage accounts.
