In general, if you are in the 12% Federal income tax bracket, then Long Term Capital Gains and Qualified Dividends are not taxed.I’ve been reading many threads here about the advantages and (in the opinion of some) disadvantages to tax efficient asset location. It seems like much of these conversations presume a high tax bracket. My question is, what if one is in a low tax bracket, like 12%? In that case, would tax deferred and taxable accounts be similar in their tax implications, considering a 12% tax on distributions from tax deferred, and a 12% tax on (some) dividends with a 0% tax on capital gains on distributions from the taxable account? If so, would, then, an asset location strategy conceiving of one’s various account as “one portfolio” be a reasonable way to proceed?
So if you will always stay in 12% or lower tax bracket, and income is LTCG or QD, and tax laws do not change much, it would not make
much difference if it was in a Roth account or a taxable account.
Short term gains, non-qualified dividends, and interest might still be taxed at 10% or 12%, so might do better in a Roth account.
You also would not have to worry about Net Investment Income Tax, Medicare IRMAA, but might still have to consider taxation of Social Security Benefits, ACA Partial Tax Credits and other income related taxes and state income taxes.
Statistics: Posted by VanGar+Goyle — Thu May 30, 2024 2:22 am — Replies 25 — Views 1433