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Finance: What is the Difference Between Load and No Load? 45 Views
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What is the difference between load and no load? Load and no load are terms used for different mutual funds. Load mutual funds charge a fee or commission when purchased. No-load mutual funds don’t charge fees unless they are cashed in early. So the choice of which to purchase depends on how confident the investor is in the length of time they want to hold the fund.
- Social Studies / Finance
- Finance / Financial Responsibility
- Life Skills / Personal Finance
- Finance / Finance Definitions
- Life Skills / Finance Definitions
- Finance / Personal Finance
- Courses / Finance Concepts
- Subjects / Finance and Economics
- Finance and Economics / Terms and Concepts
- Terms and Concepts / Accounting
- Terms and Concepts / Investing
- Terms and Concepts / Managed Funds
- Terms and Concepts / Mutual Funds
- Terms and Concepts / Stocks
- Terms and Concepts / Tax
- College and Career / Personal Finance
Transcript
- 00:00
finance a la shmoop -what is a tax deduction ah taxes love them hate them
- 00:08
you can't leave them. but you can lower them legally by being you know
- 00:13
thoughtful about how you spend your earnings. all right how do we do this?
- 00:16
well let's start with the largest tax deduction in America the home mortgage. [man stands in front of house]
- 00:21
and you use a dentist who makes a hundred fifty grand a year for putting
Full Transcript
- 00:26
your fingers in wet mouths. well remember, that for individuals versus corporations [man sticks finger into open mouth]
- 00:31
we pay a graduated or quote progressive unquote tax rate - like almost nothing on
- 00:38
the first 15 grand we earned than about 10 percent from 15 to 30 grand, and then
- 00:43
about 20 percent from 30 to 60 grand and so on. that's progressive. so on the last
- 00:48
20 grand of earnings you make well you might pay say 40 percent in taxes and [chart shown]
- 00:53
yeah we know the numbers aren't exact we're just illustrating a point here. you
- 00:56
have a mortgage of $300,000 on a home you bought for $400,000 right so you put
- 01:01
a hundred grand down and borrowed three hundred .the mortgage costs you 6% per
- 01:05
year in interest, or eighteen thousand dollars to rent that three hundred
- 01:09
thousand. before you owned the home the IRS thought of you as a hundred fifty
- 01:14
grand a year earner, but a hundred percent of the interest on the home is fully [the number 100 on screen]
- 01:20
tax-deductible .so what about that last 20 grand ie the money you earned from 130K to 150 K? well as far as the IRS is concerned, now that you have a
- 01:30
home, you get taxed as if you earned just 132 grand,
- 01:36
hundred fifty K you actually earned .why? because that eighteen thousand dollars
- 01:40
in interest comes right off the top of your earnings. see? there's the math right
- 01:45
there. 150 minus 132 in taxable earnings. it's as if you didn't earn that money
- 01:50
ever [piggy bank shaken. confetti falls out]
- 01:54
all right well if you'd had no deductions on that last $20,000 of
- 01:59
earnings you'd have paid 40 percent or $8,000 in taxes. but now on that last
- 02:04
$20,000 thanks to your mortgage deduction, well you only have taxable
- 02:09
income of $2,000 and yes you pay 40 percent on that 2,000 or 800 bucks. and
- 02:15
you mumble though thank you government for largely splitting the cost of my
- 02:19
mortgage with me. the American Dream is alive and well yeah that's what you said. [ man in suit stands in fancy room]
- 02:23
okay. and thank you Jay. there are other deductions beyond home mortgages of
- 02:28
course but well you give the gist here of how they work. from a taxpayers
- 02:32
perspective deductions like those from your home mortgages are a good thing.
- 02:37
common personal deductions also include things like prepaid health care costs,
- 02:42
and the cost of feeding quote dependent unquote children. ie those noisy things [kid jumps on a bed]
- 02:47
sleeping in your spare bedrooms until they're 18. okay so those are personal
- 02:51
deductions. things that individual citizens take. but what if you're a
- 02:55
corporation? well in a way it's kind of easier. think of most corporations as
- 02:59
having a flat 30% tax from the first dollar they make just to keep things
- 03:03
simple. participation trophy company Inc made a hundred million dollars last year
- 03:07
and paid 30 million in taxes. they netted 70 million after tax. the company really
- 03:13
needs a new trophy smelting machine because with so much demand for [metal melts in a fire]
- 03:18
participation trophies of late while the old one is running dull with mediocrity.
- 03:23
the company spends 40 million bucks on the new machine knowing that it will be
- 03:28
worthless in 10 years either because it wears out or because the country gets
- 03:31
real. or you know simply remembers to you know have a nice day, yeah participation [smiley face]
- 03:37
trophy land. well they depreciate 40 million dollars in
- 03:40
equal parts of 4 million bucks each year over 10 years so that in the next year
- 03:44
when they again earned a hundred million dollars well they now get to deduct 4
- 03:49
million bucks in depreciation from their smelting machine against their hundred
- 03:54
million dollars in earnings. so again as far as the IRS is concerned they didn't
- 03:58
really earn a hundred million dollars even though they did. they earned quote
- 04:02
only unquote 96 million. and yes they still pay their 30 percent tax only now [equation on screen]
- 04:07
instead of paying it on a hundred million bucks it's paid on 96 million of
- 04:11
earnings or 0.3 times ninety six or twenty eight point eight million in
- 04:17
taxes. they deducted from their taxes the four million bucks ,expected value
- 04:22
decline from their smelting machine. right it goes down four million a year
- 04:26
in value from the 40 they paid. and they received essentially a credit on their
- 04:30
taxes of 1.2 million dollars. so instead of that years depreciation costing the [equations shown]
- 04:36
company four million bucks well it really cost them more like 2.8 million
- 04:41
if you ignore a bunch of other things like the original capital cost of the
- 04:44
machine and what else they might have done with that money other than the you
- 04:47
know buy a smelting machine. think think corporate jet yeah those G-6 are [furnace shown]
- 04:52
surprisingly tasteful.
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