How Foreign Dividend Stocks Can Cost You

With all the interest in dividend-paying stocks, it's only natural that investors have started looking beyond the borders of the U.S. to find promising ways to add to their income-producing portfolios. But before you start counting on reaping some of the juicy yields that foreign stocks offer, you need to understand how some fairly complicated tax provisions could have a big impact on your after-tax returns. Understanding foreign taxesInvesting in U.S. companies is simple from a tax standpoint. Each year, you receive dividends from the stocks you own, and if you own them in a regular taxable account, then you have to include those dividends on your tax return and pay income tax on them. If you receive dividends on stocks you hold within a tax-favored account like an IRA, then you don't have to pay any tax on them, and you don't have to report that income on your tax return.... Read more