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Tax Tips - Save on Taxes

Interest, Dividends & Capital Gains

Individuals who receive substantial interest, dividends or capital gains income on their investments usually have no Federal or State income taxes withheld from their investment income.

Such individuals should make estimated income tax payments on the investment income they earn quarterly. Otherwise, they may receive huge, unexpected income tax bills when their income tax returns are filed the following April. Please refer to the Sidebar Estimated Tax Payments. However, there are a couple of important differences that you should take into account:

  1. Calculate your Estimated Tax Payments
    Calculate your 2 required Estimated Tax Payments:

    1. Federal Income Tax
      Multiply your investment income by 15%. This is the amount of Federal estimated income tax that you will pay. (If you expect that your Adjusted Gross Income (AGI) will be more than $450,000, multiply by 20% instead)

    2. State Income Tax

      1. (Massachusetts residents only)
        Multiply your investment income by 5.1%. If you have substantial short-term capital gains income (i.e., net income realized from the sale of stocks, bonds and mutual funds that you held for less than 12 months), multiply your short-term capital gains income by 12.0%. This is the amount of Mass. State estimated income tax that you will pay.

      2. (New Hampshire residents only)
        The State of New Hampshire does levy an income tax on interest and dividends income only. Multiply your interest and dividends income by 5.0%. This is the amount of N.H. State estimated income tax that you will pay.

        The N.H. Dept. of Revenue Administration does not offer the capability to make your State Estimated Tax Payment online.

        To make your State Estimated Tax Payment by mail, make a check payable to "State of New Hampshire" in the amount of the N.H. State tax, write your SSN and "201X Form DP-10 ES" (replace “X” with the last digit of the year) on the front of your check, and sign it. Mail your check along with the corresponding Form DP-10 ES to the address printed on the form.



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