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To my knowledge, in a traditional IRA or 401K, all growth in the account - whether from additional contributions, short-term capital gains, long-term capital gains, dividends, or whatever else - will be taxed as regular income, when one finally comes around to making withdrawals (or is forced into RMDs). This of course does not apply to a Roth IRA.
The upshot is that tax-deferred accounts extract no penalty from frequent trading, rebalancing, inter-fund exchanges and the like. But in a taxable account, any such change triggers an annual tax bill, so we're wont to be more conservative and more passive, especially if the investment in question has risen considerably. I remember numerous such conversations with colleagues in 1999 and early 2000. These guys were loaded up on Lucent, JDS Uniphase and the like. They were sitting on 200% profits, 500% profits, etc. They had a "gut feeling" of impending implosion, but could not be cajoled to act, because they feared the tax-man. As a result, they suffered 90% decline (or more) in their holdings, often falling below their original cost-basis, turning their potentially taxable event into a tax-deduction.
which is why i try to avoid dividends as much as possible. i dont need any more tax obligations than i already have.
The cap gains tax is locked in at (what is now? 15%) - so you pass up a $100 dividend because it will cost you $15? Unless you are trader in the 40% tax bracket dividend don't really hurt.
And as mentioned - it depends one what kind of acct you have.
The cap gains tax is locked in at (what is now? 15%) - so you pass up a $100 dividend because it will cost you $15? Unless you are trader in the 40% tax bracket dividend don't really hurt.
And as mentioned - it depends one what kind of acct you have.
what do you mean "passing it up"? what exactly am i passing up by not getting the dividend? it just gets taken from the value of the stock.
The cap gains tax is locked in at (what is now? 15%) - so you pass up a $100 dividend because it will cost you $15? Unless you are trader in the 40% tax bracket dividend don't really hurt.
And as mentioned - it depends one what kind of acct you have.
you are not correct . the long term capital gains rate starts at zero and goes up to 23.80% depending on total income . .
but any gains that high have triggered the amt tax on all other income .
state and local taxes have no capital gains rates either .
i hit the top capital gain level 2 years ago and my total tax on every penny of income plus the gain came to a flat 29% from dollar 1 . that is not a marginal rate , that was the effective rate i paid for federal , state and local taxes .
The cap gains tax is locked in at (what is now? 15%) - so you pass up a $100 dividend because it will cost you $15? Unless you are trader in the 40% tax bracket dividend don't really hurt.
And as mentioned - it depends one what kind of acct you have.
nonsense . the dividend is a refund of a piece of your share price . if you reinvest it is pretty much a wash where you stood before it went ex div .
you can pull the same 15 bucks from a growth portfolio and have the same exact balance left assuming the same total return or greater and you will only pay taxes on the gain portion not the whole 15 dollars .
nonsense . the dividend is a refund of a piece of your share price . if you reinvest it is pretty much a wash where you stood before it went ex div .
you can pull the same 15 bucks from a growth portfolio and have the same exact balance left assuming the same total return or greater and you will only pay taxes on the gain portion not the whole 15 dollars .
Yes, that might be true but then you have to pay for the trade.
there is no trade fee with funds as well as many etf's today . dividends are convenient but in retirement they can play havoc with other things linked to income that you have no control over .
i could not get an aca subsidy from 62 to 65 because dividends put me over the limits . i also was not able to utilize the zero capital gains brackets because i was over . they can also get your ss taxed where it might not have been .
so uncontrolled taxable income is not always what you want .
it is better to keep dividend payers in retirement accounts . as little as a 2% dividend over the long term wipes out any tax advantage from the special capital gains rates .
at this point only dividend payer i have is voo my s&p index fund . other than that my funds do make yearly distributions of capital gains but none spin off dividends . my old model spun off a lot in dividends , in fact to much tax wise .
Last edited by mathjak107; 08-10-2018 at 02:14 AM..
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