Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTReuben Gregg Brewer, The Motley FoolSun, September 6, 2026 at 8:35 PM GMT+2 5 min readInvesting is about more than just picking good stocks and bonds and holding them for the long term. You should also consider the tax implications of the investments you make. The easiest example of this is the bond space, with the dichotomy between corporate and municipal bonds. Corporate bonds are fully taxable, but muni bonds can help you avoid paying taxes on the income they generate.But there's another level to the issue, because certain retirement accounts also allow you to avoid taxation. Investors in ultra-high-yield mortgage real estate investment trusts (REITs) and business development companies (BDCs) need to pay close attention to where they place these securities. Here's where they probably belong, if you want to minimize your tax hit.Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »Image source: Getty Images.You need to pay your taxes, but you don't want to pay too muchThe taxes you pay help to pay for all of the government services that you receive. That includes something as simple as having a road to drive your car on, to more complex things like paying your state representatives. For the most part, these are good things, and you should pay your taxes. If you don't, the government will eventually come calling. You don't want that to happen.That said, the tax code is mind-boggling complex. The simple logic is that if you earn income, you have to pay some tax on that income. That's easy enough if the income you earn comes from a job. It is more complex if the income is generated from investments you own. Dividends, as it were, are not all created equally.This is particularly important for real estate investment trusts and business development companies. Both of these corporate structures are designed to pass income on to shareholders in a tax-advantaged manner. So long as REITs and BDCs pass at least 90% of their taxable income on to shareholders as dividends, they do not pay corporate income tax. The shareholder pays taxes on that dividend income, which is taxed at the same rate as earned income. There are nuances here, but that's the big picture you need to keep in mind.What's AGNC's 13% yield doing to your taxes?AGNC Investment (NASDAQ: AGNC), a well-respected mortgage REIT, has a 13.5% dividend yield as of this writing. Annaly Capital (NYSE: NLY), another mREIT, yields roughly 12.5%. Main Street Capital (NYSE: MAIN), a highly respected BDC, has a yield of 5.5%, which rises to around 7.5% if you include its special dividends. And Ares Capital Management (NASDAQ: ARCC), one of the largest BDCs you can buy, has a yield of 9.5%.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info