My late father was fond of saying, "you knew you were making money if you were paying taxes". And as true as that is, it doesn't make it any easier to swallow nor do you have to pay more than you should.

Accomplished investors should base their success on an ability to manage the tax implications of their portfolio. Although not all do. For those of us whose portfolios could use a little help, taxes are often not even considered unless they result in penalties (as in 'for early withdrawals'). Taxes however are an important and necessary consideration when it comes to how and where you take gains from those investments.

As our investments grow, so does the reach of the revenue branch of the government. Proper handling of how your investments are positioned puts more money in your pocket. One of the first steps towards that end comes with understanding your tax bracket.

Just to update you on the existing tax brackets, your last earned dollar is taxed at the following rate: 10, 15, 25, 28, 33 or 35%. To put that in better prospective, a couple, filing as married and jointly can have an income of $58,100 and reside comfortably in the 15% bracket. Their actual earnings may be higher but because this couple probably had deductions for a home, kids, etc., their income was taxed at the lower rate. But one dollar more would be taxed at the next rate up the line - 25%.

Often that additional income comes by way of an investment. Take a 10% return on a hypothetical $1,000 and tax it at 25% and the return is reduced to 7.5%.

This kind of error in thinking is as common as it is complicated to fix. It is important to remember some recent changes in the tax law. Now dividends, the kickback shareholders get for their loyalty to a cash-rich company, will be taxed at the 15% rate no matter what bracket your income is taxed. That 15% limit also applies to long term gains. Long term, in this case, refers to people who buy and hold a stock for twelve months or longer.

If you are a single...

If you are a Married filing Joint returns...

If you are a Married filing Separately...

If you are a Head of Household...