If you receive a dividend and pay 15% tax on it, you get 85% of the dividend as after-tax income.If qualified dividends are taxed at capital gains rate, and I'm at the 15% LTCG rate, isn't that going to get very expensive very quickly? E.G., this year I had $1,134 in qualified dividends from not a huge account (sitting at $86k currently). So I'm over here thinking like wow, if my income keeps going up and I keep throwing money at this thing, am I going to eventually be stuck with massive tax bills every year just from holding investments and not even selling? For people with large taxable accounts, like many of you I see, is this what's happening to you?
Or am I way off on math here and this isn't an issue for anybody? Please help me understand.
You can drive your taxes on this income down to zero by putting the money in your mattress. The problem is that your after-tax return will also be zero.
The flaw in your thinking is focusing on taxes instead of after-tax return. If and when your holding has grown to generate $10K of dividends, your after-tax income from dividends will be much higher. That is a good thing.
But you should fund IRAs and/or 401K's or ither tax-qualified accounts fully before funding a taxable account.
Statistics: Posted by Northern Flicker — Sun Feb 25, 2024 4:06 pm — Replies 7 — Views 183