could you possibly imagine if in your first month of High School you were taught this ? It would change the life of so many people. This knowledge is literally PRICELESS!. I am 65 and an Engineer and am learning things that will make a huge difference in my life in the next five to ten years. Thanks Viktoriya. This is pure GOLD!
Now is the right time. If you really want to grow your money and attain financial independence. Start investing, that's the best way to accumulate wealth. Spent my 30s and 40s investing in stock and several multifamily real estates. That’s the best I did for myself as it has consistently beaten my expectations of a return.
Not quite long I started investing. I'm very curious and need help on how to enhance and increase my returns. Any good investment tips would be appreciated.
Generally, investing requires higher knowledge. For this reason, It's important to have a solid support structure financial consultaant to guide you through especially in asset picking. I operate with Camille Anne Hector a consultant who partners with a licensed wealth management firm. For the record, the experience has been the best for my finance. She made me financially stable investing through her help, now I earn on a monthly basis through her passive income strategy... So I'd advise you do get a good investment advisor for yourself.
She is easy to find , make a quick research of her on the internet with her name Camille Anne Hector. Her official website should be easy to find online and on here you can shoot her a mail. She works with anyone independent of their location.
Tnx for this info, I just looked up your investment manager and found the page. Her experience is pretty impressive. I wrote her and I'm waiting on her reply.
Thanks for the analysis. One point. All funds that are withdrawn from a tax deferred IRA are taxed as ordinary income, including capital gains and dividends. That’s why I’m not a fan. Additional point: you can withdraw your own contributions to a Roth IRA without penalty at any time. You’re only penalized if you take out the appreciation too soon.
Nice review. This is important stuff, especially if you are investing in different types of accounts - Trad 401(k)/IRA, Roth 401(k)/IRA, and/or taxable brokerage.
This review is ok. It covers qualified and unqualified dividends but a HUGE but that she is leaving out is a FACT in the IRS tax code is that long term buy and hold stocks that appreciate in value are not taxed on capital gains in a TAXABLE account aka brokerage UNTIL they ARE SOLD. They are taxed at long term capital gains rates which are 0 15 or 20 percent. Short term capital gains at your normal marginal tax rate if held less than 1 year and 1 day. Qualified dividends have to be US based companies. If you buy stock outside the US like nestle for example you have to pay that country's tax and US income tax as well... BDCs MLPs are also not covered. If she is going to talk taxes please do a deep dive or a multi part video. This can confuse the beginning investors.
I’ve been giving a lot of thought lately to my tax bill next year, and my A-Hole is still sore just thinking about it! 😢 Taxes are a valuable subject to talk about, and my knowledge is nil, so THANKS FOR THE VIDEO! And any future videos on taxes would be appreciated. Man, they really stick it to you at tax time! And you don’t even get a kiss first!
You are able to withdraw the money that you put in to a roth ira wo penalties. You will be penalized for withdrawing gains though. So if I invest $1000 into a roth and it earns $100, I will be taxed if I withdraw the $1100 but not if I only withdraw my original contribution of 1k
Interesting choice of annual income amount for your example since less than 7% of the US population earns 200K or more per year. If I made that kind of income, I wouldn't even consider investing into a higher yielding fund that pays ordinary dividends. Median household income is around 70K per year. That might be a little better number to use for the vast majority of viewers. Great content but just a suggestion.
Your statement at 12:58 about IRA accounts is not correct. All funds distributed from a traditional IRA are considered ordinary income and reported on a 1099-R. There is nothing on the 1099-R that indicates whether any of the distribution is from qualified dividends.
Thank you Viktoriya, as an ETF junkie myself your channel is a valuable source and your charm is off the charts. Congratulations on your 10k subscribers, you're going up like a rocket. 🚀
Viktoriya, new subscriber. Been watching "investment" channels and really like your content. So, subscribed (and smashed the "thumbs up" button, too). In fact, awesome content. Gonna binge watch a bunch of your other uploads.
I think the statement made at 13:00 is incorrect. The withdrawals from a traditional IRA or 401k are tax as income no matter the source of the gains so there is no advantage between dividend income, interest or capital gains.
Thanks for excellent Vid! But I would love to see an encore Vid where you reinvest the dividends. I suspect the covered call ETF (RYLD, XYLD etc. ) may look much better then, because the stronger compounding with the highest yield would take the lead. Thanks!
Yes. Agreed. By definition, in both IRAs and Roth IRAs, your not paying taxes annually like you are in taxable accounts. Thus, the example shown is most relevant only to the taxable accounts. I’m so interested to see the differences compounding makes on tax deferred accounts that I’m now going to run a calculation myself.
Great video! Do you have one that looks for ETF with max gain over the long term independent of tax implications? I ask for purposes of IRA, Roth IRA, 401k. So unqualified wouldn’t matter and also long term appreciation does matter, so covered call ETFs are likely out. Thank you!
Great video. Do you have one that shows how something like $DIVO is reported on the 1099? Do you have to split it manually somehow, or does your broker know how to classify the dividends between Q and NQ? Thx
Assuming a couple with decent full time jobs, basically everyone is at least in the 15% QD tax and 24% non-QD tax bracket when it comes to investment income taxes since investment income stacks on top of regular earnings through your jobs. Some will also incur the net investment tax of 3.8%, some won't. Just ignore it, because either way it would apply to a QD or non-QD the same if you are over the threshold. For starters, just because its a covered call ETF, that does not mean all yield is non-QD. JEPI was about 15% QD and 85% non-QD yield for year 2022. The QD portion be taxed at 15%, while the non-QD portion is taxed at 24% (in the most common MFJ tax bracket case). So, if you invested the same amount in SCHD vs JEPI 12 months ago, your after pre-tax yield would be 3.62% for SCHD and 11.47% for JEPI. Your after tax yield would be 3.07% for SCHD and 8.87% for JEPI. In the last 12 months you would be down 8.18% on SCHD on the stock value, while you would be down 12.07% on JEPI. Before taxes including the yield, that means you are down 4.56% on SCHD and down 0.6% on JEPI overall. After taxes including the yield, you are down 5.11% on SCHD and down 3.2% on JEPI. It is undeniable that JEPI has easily beat SCHD over the last 12 months with or without taxes applied. SCHD may have matched or even slightly beat some CC ETF's, but not JEPI. JEPI is winning by a fair margin over the last 12 months. For year 2022, Jan 1 to Dec 31, it was pretty even. But when you consider the huge advantage of monthly distributions, its still a win for JEPI. Think of how many dips you missed because SCHD distributions are 3 months apart. That should not be underestimated. In a tax-deferred account (401k, Traditional IRA, etc.) over the last 12 months you are basically broke even on JEPI being only down 0.6% despite the SPY being down around 7% (with the dividend). Same account, SCHD is down about 4.56% (with the dividend).
@@nightdonutstudio JEPI's yield fluctuates. That comment was from over a year ago. I actually put dates in the comment and talked about a specific period.
Strictly speaking, income from writing call options is premium, not dividend. Dividend is distributed earnings from business activities. JEPI, QYLD, etc. generate income from investment activities.
Unfortunately, I've screwed up a couple of small fortunes and have had to start all over, again at age 60. Am still lucky to have a 6 figure overseas job, so I can ramp up paying off my house and accumulating a dividend portfolio. Some of these strategies, I haven;t time to let them really work and some of the stock and ETF picks are too expensive for me to accumulate enough shares to make any difference. I have settled on about a dozen monthly paying ETFs that should do me well. And, IF....IF SS holds for another few years, my income level will provide a pretty decent SS pay back.
The problem with dividends in a non-retirement account is that you can't choose when to take them. If you have some reason to try limit your taxable income for a given tax year, you are SOL. For example, trying to stay under IRMAA or Social Security thresholds while performing Roth conversions. For these situations, there is no difference between qualified and unqualified dividends. And you likely won't be able to exit the positions generating the dividends without generating even greater capital gains, so you are stuck with the dividends. Much better to keep high-dividend investments in a Roth account.
To confirm…wow…it’s really true that If it’s within a Roth IRA, it Doesn’t Matter if it’s qualified or ordinary dividends because Neither are taxed at all!?!? I mean that’s huge! Very nice
Yeah, ALSO consider stock DEpreciation, reduced dividend yields…. AGNC used to be a great REIT but then first reduced the dividend, and then the stock price slowly dropped over time.
Are SPY dividends qualified? About 97% of SPY dividends are qualified dividends -- taxed at long-term capital gain rates rather than ordinary income rates (for people paying US income taxes)
Awesome video!!! Really detailed on how taxes affect investing. Do you have a video explaining what to do if you at in your 60's, and you get a lump sum of $700K and how to best invest and pay little in taxes... Keep up the great work, I hit LIKE, Subscribed ;-)
A portion of the funds dividends come from the qualified dividends distributed from its underlying holdings, so yes that would be around 15% - 20%. The rest comes from the premium income it collects through its covered call strategy which are non qualified dividends :)
My mom is in an expensive inpatient memory care facility. I moved her investments into short term bonds, QYLD, JEPI, and other income investments. Her medical expenses will be around 100k this year. Her ordinary income from all sources will be less than that, so zero taxes. It just depends where you in life.
#Video_Idea_1 Your thoughts on investing in single sp500 index fund using DCA vs. investing in sector ETFs (all sectors) but only buying when the sector is down. Bonus points for scenario modeling using historical & forecasted data. #Video_Idea_2 Comparing returns of a low fee ETF to a portfolio of same stocks purchased individually, visualizing potential gains by saving on expense ratios. thx
SPYD Overview The presence of REITs indicates not all dividend income is considered qualified for income tax purposes. To illustrate, State Street's Primary Tax Summary for 2022 highlighted how SPYD's total dividends were $1.9833 per share for the year, with $1.4499 (73.10%) designated as qualified.
thank you!! great video and explanaition on topic. your knowledge and presentation has quickly become one my favorite channels. best wishes and to your continued success!! 👏🙂
None of those preserved the original capital enough! Even bonds are struggling to do that right now. I bought JEPI and QYLD after they plunged in 2022 and so far they are doing all right, but I worry about losing my original investment and then the monthly dividend income is just a wash or a loss. Stupid. Might as well have cash under a mattress losing 8-10% value due to rampant inflation.
Great video! I’m a foreign investor and I pay 30% withholding tax on qualified dividend. If I invest in non-qualified, how will this be calculated then?
You get a fixed rate of 30% on dividends unless you claim treaty benefits, usually with your W-8BEN. You pay no taxes on capital gains, but you may have derived obligations at home. You must file your taxes with the IRS through form 1040-NR. This is my understanding. Don’t misconstrue it as financial advice, it isn’t. It’s always advisable for foreign individuals to consult with tax professionals or experts for their specific circumstances, as tax laws and treaties can be complex and subject to change.
Does it make sense for me to own Schd or similar dividend etf’s if I will be receiving a very good private pension? I won’t need dividend income. Would I be better off with something like brk for non-growth?
Viktoria, excellent explanation of the differences between the types of dividends. However, since you highlighted SCHD in your example, I'd like to provide this quote from the SCHD prospectus summary on the Schwab Asset Management website: "Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains..." I have some SCHD in my brokerage account and my most recent SCHD dividend deposit does indeed show up as ORDINARY, not QUALIFIED, thus does **not** receive the reduced tax rate treatment. I have also read that if you "hedge" your position in an otherwise QUALIFIED dividend payer (for example, by selling covered calls against your stock) the dividends will be treated as ordinary.
So if I made $10,000 in taxable income for the year, plus I made $40,000 in qualified dividend earnings for the same year, would I pay only the 10% on the $10,000 and %0 on the $40,000?
My employer's plan allows for "in-plan Roth conversions". I tried to put my excess (post-tax) money into a ROTH but succeeded in putting almost ALL of my 401k into a ROTH. Needless to say, that years tax bill was STAGGERING but I was able to use the money in the acct to pay the bill, since I had already had a ROTH tied to the account. My CPA said that it was either the dumbest thing he had ever seen or the smartest. This depends on how long I live! But here's the way I look at it....I have most of my ROTH money in Div stocks and will earn thousands of tax-free dollars every month for as long as I live. I think I am going to come out WAY ahead if I can make it to age 70.
I love that there’s such a thing as “Back Door Roth IRA” and looking forward to learning more about it and other details of Roth IRAs. Great detailed informative video and comparisons, thanks
I'm growing my brokerage account first , then I'll move my profits or div. payments to my ROTH IRA. I know it's not the best strategy but this way , if I need to take out some money for myself, I'll take it from my immediate account.
You should consider establishing the Roth account anyway. You can always withdraw your contributions without penalty, just not the earnings. And the earnings will compound faster in the Roth. Actually it's good to have a balance of account types (regular + IRA + Roth).
@@captsorghum Yes. Right now growing the brokerage one. I'm going to have the same stocks on the ROTH IRA. I didn't know I could withdraw the way you just told me from the IRA. That's very interesting.
Greetings from Alabama! Your channel fills the gaping hole in most UA-cam investing content; tax impacts everything and isn’t adequately addressed in most investing content. It’s not how much you make that counts. It’s what you keep that allows you to build wealth. Well done!
So married filing jointly gives you a bit over $85,000 of ordinary income before your qualified income starts taking a tax hit. Let that sink in when making determinations about something like Jepi. Scenario Im aiming for is around $60,000 in ordinary income in semi retirement. 2024 I will be seeing a large amount of that target be from jepi and O. Once I hit that goal I will no longer be investing in anything that provides ordinary income. That $25,000 between my target and the upper bound of the tax brackets Im aiming for will let me possibly have a hobby business or perhaps do some small jobs without too much concern.
Look to use your tax advantaged accounts for this kind of investment. Roth ira or Regular ira. These are not taxed like that. Beware of using thise accounts for investing in MLPs though
@@mikeshuman7393 Oh Im stacking into my roth ira to the limit every year. Tbh Im not even considering that for my calculations. The goal for the roth is total return until I get near 59 and then turn it into something more dividend focused. And yeah the mlp I am invested into is in my regular account. It is a forever holding that I fully expect will pass on to my heirs.
Im interested to know how these accounts perform in tax advantaged accounts, I would have thought the covered call ETF would have done better in a bear market for Roth IRA, but from the looks of it, doesnt seem so
Qualified dividends are great for someone with a very low AGI that wants some tax free income on the side before they reach 59.5 and have full access to their roth Ira tax free.
One can argue this analysis oversimplifies things. For example let's assume SCHD (which I own and keep buying more of on dips) will have higher price appreciation over time than the "gimmicky" (my view of them) high yield investments.. Eventually SCHD holders will sell the shares and need to pay taxes.... unless the owner is dead and stepped up cost basis law still exists. Really need to evaluate total gain after taxes through the whole holding period - the final sale. I'm hoping my shares will get stepped up cost basis and will be transferred into supplemental needs trust after my death. Haven't met with lawyer yet to evaluate....
Hi, if you make $100k income per year do you pay 15% tax on the full amount of dividends or just a percentage on the amount over the $89k if you are married? Thank you
No, SCHD is mostly Qualified Dividends. The problem is that when ETF dividends are first distributed, your broker does not know if they are qualified or not, and in what proportion. Typically they will show up on your monthly statement as "Cash Dividends". However, this is resolved for you by the time your 1099s are issued.
GREAT video Viktoriya, just suggested to my investing buddies. Would definitely like to see follow-up content on which dividend income flavor (or even down to the ETF, like you did in the comparison on this video) performs best in Roths. Would also love to hear more about how to backdoor Roth in general.
could you possibly imagine if in your first month of High School you were taught this ?
It would change the life of so many people.
This knowledge is literally PRICELESS!.
I am 65 and an Engineer and am learning things that will make a huge difference in my life in the next five to ten years.
Thanks Viktoriya. This is pure GOLD!
Now is the right time. If you really want to grow your money and attain financial independence. Start investing, that's the best way to accumulate wealth. Spent my 30s and 40s investing in stock and several multifamily real estates. That’s the best I did for myself as it has consistently beaten my expectations of a return.
Not quite long I started investing. I'm very curious and need help on how to enhance and increase my returns. Any good investment tips would be appreciated.
Generally, investing requires higher knowledge. For this reason, It's important to have a solid support structure financial consultaant to guide you through especially in asset picking. I operate with Camille Anne Hector a consultant who partners with a licensed wealth management firm. For the record, the experience has been the best for my finance. She made me financially stable investing through her help, now I earn on a monthly basis through her passive income strategy... So I'd advise you do get a good investment advisor for yourself.
please how do i get in touch with her
Impressive. Would you mind sharing some more details. I’d like to have a talk with her.
She is easy to find , make a quick research of her on the internet with her name Camille Anne Hector. Her official website should be easy to find online and on here you can shoot her a mail. She works with anyone independent of their location.
Tnx for this info, I just looked up your investment manager and found the page. Her experience is pretty impressive. I wrote her and I'm waiting on her reply.
Probably one of the best explanation on qualified and just income dividend I seen out there. Lady has her act together!
The best comparison video I have seen. And I have seen dozens. Thank you!!
Thanks for the analysis. One point. All funds that are withdrawn from a tax deferred IRA are taxed as ordinary income, including capital gains and dividends. That’s why I’m not a fan. Additional point: you can withdraw your own contributions to a Roth IRA without penalty at any time. You’re only penalized if you take out the appreciation too soon.
Nice review. This is important stuff, especially if you are investing in different types of accounts - Trad 401(k)/IRA, Roth 401(k)/IRA, and/or taxable brokerage.
This review is ok. It covers qualified and unqualified dividends but a HUGE but that she is leaving out is a FACT in the IRS tax code is that long term buy and hold stocks that appreciate in value are not taxed on capital gains in a TAXABLE account aka brokerage UNTIL they ARE SOLD. They are taxed at long term capital gains rates which are 0 15 or 20 percent. Short term capital gains at your normal marginal tax rate if held less than 1 year and 1 day. Qualified dividends have to be US based companies. If you buy stock outside the US like nestle for example you have to pay that country's tax and US income tax as well... BDCs MLPs are also not covered. If she is going to talk taxes please do a deep dive or a multi part video. This can confuse the beginning investors.
That's a 1-hour video or more cover all this; not the point of this video. This is just taxation on ordinary vs qualified dividends.
She’s talking about dividends.
That assumes growth. Right now, growth is dead.
Do ail. And none matter in an IRA??Thanks.
I’ve been giving a lot of thought lately to my tax bill next year, and my A-Hole is still sore just thinking about it! 😢 Taxes are a valuable subject to talk about, and my knowledge is nil, so THANKS FOR THE VIDEO! And any future videos on taxes would be appreciated. Man, they really stick it to you at tax time! And you don’t even get a kiss first!
Looking forward to your JEPQ vid!!
You are able to withdraw the money that you put in to a roth ira wo penalties. You will be penalized for withdrawing gains though. So if I invest $1000 into a roth and it earns $100, I will be taxed if I withdraw the $1100 but not if I only withdraw my original contribution of 1k
Interesting choice of annual income amount for your example since less than 7% of the US population earns 200K or more per year. If I made that kind of income, I wouldn't even consider investing into a higher yielding fund that pays ordinary dividends.
Median household income is around 70K per year. That might be a little better number to use for the vast majority of viewers. Great content but just a suggestion.
Thank you for braking every step down, I dearly appreciate your talent. 👏🏻👏🏻👏🏻
No problem!😊 I'm really happy to hear you enjoyed the video!
Your statement at 12:58 about IRA accounts is not correct. All funds distributed from a traditional IRA are considered ordinary income and reported on a 1099-R. There is nothing on the 1099-R that indicates whether any of the distribution is from qualified dividends.
I love how you broke it down to both bull and bear market.
Thank you Viktoriya, as an ETF junkie myself your channel is a valuable source and your charm is off the charts. Congratulations on your 10k subscribers, you're going up like a rocket. 🚀
Just ran across you channel. It is one of the best explanations I have seen.
Viktoriya, new subscriber. Been watching "investment" channels and really like your content. So, subscribed (and smashed the "thumbs up" button, too). In fact, awesome content. Gonna binge watch a bunch of your other uploads.
I think the statement made at 13:00 is incorrect. The withdrawals from a traditional IRA or 401k are tax as income no matter the source of the gains so there is no advantage between dividend income, interest or capital gains.
Yes that is correct. Maybe we shouldnt be getting tax advise from random youtube girl
Thanks for excellent Vid! But I would love to see an encore Vid where you reinvest the dividends. I suspect the covered call ETF (RYLD, XYLD etc. ) may look much better then, because the stronger compounding with the highest yield would take the lead. Thanks!
Yes. Agreed. By definition, in both IRAs and Roth IRAs, your not paying taxes annually like you are in taxable accounts. Thus, the example shown is most relevant only to the taxable accounts. I’m so interested to see the differences compounding makes on tax deferred accounts that I’m now going to run a calculation myself.
Great video! Do you have one that looks for ETF with max gain over the long term independent of tax implications? I ask for purposes of IRA, Roth IRA, 401k. So unqualified wouldn’t matter and also long term appreciation does matter, so covered call ETFs are likely out. Thank you!
First off, great video!! Thank you for the information 😃Secondly, is there a list of qualified dividend ETFs like SCHD somewhere online?
Great video. Do you have one that shows how something like $DIVO is reported on the 1099? Do you have to split it manually somehow, or does your broker know how to classify the dividends between Q and NQ? Thx
Assuming a couple with decent full time jobs, basically everyone is at least in the 15% QD tax and 24% non-QD tax bracket when it comes to investment income taxes since investment income stacks on top of regular earnings through your jobs. Some will also incur the net investment tax of 3.8%, some won't. Just ignore it, because either way it would apply to a QD or non-QD the same if you are over the threshold.
For starters, just because its a covered call ETF, that does not mean all yield is non-QD. JEPI was about 15% QD and 85% non-QD yield for year 2022. The QD portion be taxed at 15%, while the non-QD portion is taxed at 24% (in the most common MFJ tax bracket case). So, if you invested the same amount in SCHD vs JEPI 12 months ago, your after pre-tax yield would be 3.62% for SCHD and 11.47% for JEPI. Your after tax yield would be 3.07% for SCHD and 8.87% for JEPI.
In the last 12 months you would be down 8.18% on SCHD on the stock value, while you would be down 12.07% on JEPI. Before taxes including the yield, that means you are down 4.56% on SCHD and down 0.6% on JEPI overall. After taxes including the yield, you are down 5.11% on SCHD and down 3.2% on JEPI. It is undeniable that JEPI has easily beat SCHD over the last 12 months with or without taxes applied. SCHD may have matched or even slightly beat some CC ETF's, but not JEPI. JEPI is winning by a fair margin over the last 12 months.
For year 2022, Jan 1 to Dec 31, it was pretty even. But when you consider the huge advantage of monthly distributions, its still a win for JEPI. Think of how many dips you missed because SCHD distributions are 3 months apart. That should not be underestimated.
In a tax-deferred account (401k, Traditional IRA, etc.) over the last 12 months you are basically broke even on JEPI being only down 0.6% despite the SPY being down around 7% (with the dividend). Same account, SCHD is down about 4.56% (with the dividend).
Wow. I would love to be able to do all that logically! Well done!
wait, jepi is only 7% dividend yield.
@@nightdonutstudio JEPI's yield fluctuates. That comment was from over a year ago. I actually put dates in the comment and talked about a specific period.
you are good teacher, there is always something to learn from any of your videos.
Thank you.
New sub here. Really enjoyed the thoroughness in this video 😊
I’ll patiently await your content on the back door IRA 🙏🏾
Can you make a video explaining the tax of TSLY AND NVDY?
Love your videos. I watch them all the time and recommended this channel to my daughter.
Strictly speaking, income from writing call options is premium, not dividend. Dividend is distributed earnings from business activities. JEPI, QYLD, etc. generate income from investment activities.
Unfortunately, I've screwed up a couple of small fortunes and have had to start all over, again at age 60. Am still lucky to have a 6 figure overseas job, so I can ramp up paying off my house and accumulating a dividend portfolio. Some of these strategies, I haven;t time to let them really work and some of the stock and ETF picks are too expensive for me to accumulate enough shares to make any difference. I have settled on about a dozen monthly paying ETFs that should do me well. And, IF....IF SS holds for another few years, my income level will provide a pretty decent SS pay back.
PEY also has a much higher expense ration than SCHD or VYM. So while the yield looks much higher, it's really not.
does the expense ratio affect the bottom line dividends that you collect ?
I really like how you did the math at the end showing the results. I can see your UA-cam video growing huge soon. Kudos
The problem with dividends in a non-retirement account is that you can't choose when to take them. If you have some reason to try limit your taxable income for a given tax year, you are SOL. For example, trying to stay under IRMAA or Social Security thresholds while performing Roth conversions. For these situations, there is no difference between qualified and unqualified dividends. And you likely won't be able to exit the positions generating the dividends without generating even greater capital gains, so you are stuck with the dividends. Much better to keep high-dividend investments in a Roth account.
Thank you Viktoriya! I have been wondering about this exactly. Super helpful video :)
Welp, this was super informative and straight to the point. We love it!
Older people are in a higher tax bracket? Don't seniors typically pay less in taxes because they are no longer working full-time or working at all?
It is very ironic that I’m holding SCHD on Charles Schwab itself, yet is says that the dividend I received is ordinary income.
I have TD Ameritrade (owned by Schwab) and the online transaction history shows SCHD as ordinary dividends, but my 1099 info shows it as qualified.
To confirm…wow…it’s really true that If it’s within a Roth IRA, it Doesn’t Matter if it’s qualified or ordinary dividends because Neither are taxed at all!?!? I mean that’s huge! Very nice
Yeah but you can’t take the money for awhile .
Yeah, ALSO consider stock DEpreciation, reduced dividend yields…. AGNC used to be a great REIT but then first reduced the dividend, and then the stock price slowly dropped over time.
You’re so attractive and intelligent and informative. Thank you for this content!
Are SPY dividends qualified?
About 97% of SPY dividends are qualified dividends -- taxed at long-term capital gain rates rather than ordinary income rates (for people paying US income taxes)
Awesome video!!! Really detailed on how taxes affect investing. Do you have a video explaining what to do if you at in your 60's, and you get a lump sum of $700K and how to best invest and pay little in taxes... Keep up the great work, I hit LIKE, Subscribed ;-)
If they ever bring back Little House on the prairie this young lady needs to be on it 😅
Roth IRA limit the ETF you can buy. For example, JEPI is not available. Also think of JEPI as a high yield saving account and it will make more sense
?? I own JEPI in my Roth. Must be a limit by your brokerage.
Everyone is saying only 15 to 20 percent of JEPI dividends are qualified. All the official sites.
A portion of the funds dividends come from the qualified dividends distributed from its underlying holdings, so yes that would be around 15% - 20%. The rest comes from the premium income it collects through its covered call strategy which are non qualified dividends :)
My mom is in an expensive inpatient memory care facility. I moved her investments into short term bonds, QYLD, JEPI, and other income investments. Her medical expenses will be around 100k this year. Her ordinary income from all sources will be less than that, so zero taxes. It just depends where you in life.
#Video_Idea_1 Your thoughts on investing in single sp500 index fund using DCA vs. investing in sector ETFs (all sectors) but only buying when the sector is down. Bonus points for scenario modeling using historical & forecasted data.
#Video_Idea_2 Comparing returns of a low fee ETF to a portfolio of same stocks purchased individually, visualizing potential gains by saving on expense ratios.
thx
Very nice video, Thank you very much, what are your thoughts on FDVV etf pls
Can I still open a Roth IRA if I’m 61 years old but want to continue working until I’m 70 and not pay tax when I withdraw from the Roth IRA
This doesn't apply if invested in a Roth IRA, correct ?
This was very thorough, I appreciate that. So eye opening. Take my sub!
SPYD Overview
The presence of REITs indicates not all dividend income is considered qualified for income tax purposes. To illustrate, State Street's Primary Tax Summary for 2022 highlighted how SPYD's total dividends were $1.9833 per share for the year, with $1.4499 (73.10%) designated as qualified.
Hooray for using “single taxpayers” as the primary example!
A perfect job covering this super important topic. You picked some of the best etfs for your case study; well done.
Great as always. So which etf performed best in a roth account?
Cheers
Jef
Very good video, I wonder if you can make a video similar for non US residents
thank you!! great video and explanaition on topic. your knowledge and presentation has quickly become one my favorite channels. best wishes and to your continued success!! 👏🙂
Watch out for MLPs in a Roth
Very good analysis and summary, thanks for sharing.
Most of the people I know will NOT be in a higher tax bracket upon retirement
None of those preserved the original capital enough! Even bonds are struggling to do that right now. I bought JEPI and QYLD after they plunged in 2022 and so far they are doing all right, but I worry about losing my original investment and then the monthly dividend income is just a wash or a loss. Stupid. Might as well have cash under a mattress losing 8-10% value due to rampant inflation.
Joma Junior probably hopes to see you again in the future too!
I'm sure we have all done that.
Does the $44,625 include the dividend income?
Great video!
I’m a foreign investor and I pay 30% withholding tax on qualified dividend.
If I invest in non-qualified, how will this be calculated then?
You get a fixed rate of 30% on dividends unless you claim treaty benefits, usually with your W-8BEN. You pay no taxes on capital gains, but you may have derived obligations at home. You must file your taxes with the IRS through form 1040-NR. This is my understanding. Don’t misconstrue it as financial advice, it isn’t. It’s always advisable for foreign individuals to consult with tax professionals or experts for their specific circumstances, as tax laws and treaties can be complex and subject to change.
Does it make sense for me to own Schd or similar dividend etf’s if I will be receiving a very good private pension? I won’t need dividend income. Would I be better off with something like brk for non-growth?
Viktoria, excellent explanation of the differences between the types of dividends. However, since you highlighted SCHD in your example, I'd like to provide this quote from the SCHD prospectus summary on the Schwab Asset Management website: "Dividends and capital gains distributions received from the fund will generally be taxable as ordinary income or capital gains..." I have some SCHD in my brokerage account and my most recent SCHD dividend deposit does indeed show up as ORDINARY, not QUALIFIED, thus does **not** receive the reduced tax rate treatment. I have also read that if you "hedge" your position in an otherwise QUALIFIED dividend payer (for example, by selling covered calls against your stock) the dividends will be treated as ordinary.
11:31 about JEPI! i would take JEPI everyday on a ROTH IRA acct!
So if I made $10,000 in taxable income for the year, plus I made $40,000 in qualified dividend earnings for the same year, would I pay only the 10% on the $10,000 and %0 on the $40,000?
Great video and useful comparison of HY dividend ETFs.
My employer's plan allows for "in-plan Roth conversions". I tried to put my excess (post-tax) money into a ROTH but succeeded in putting almost ALL of my 401k into a ROTH. Needless to say, that years tax bill was STAGGERING but I was able to use the money in the acct to pay the bill, since I had already had a ROTH tied to the account.
My CPA said that it was either the dumbest thing he had ever seen or the smartest. This depends on how long I live! But here's the way I look at it....I have most of my ROTH money in Div stocks and will earn thousands of tax-free dollars every month for as long as I live. I think I am going to come out WAY ahead if I can make it to age 70.
(13:33 Roth IRA clarification-“earnings” cannot be withdrawn until age 59.5, but Contributions Can be withdrawn without penalty. Right?)
Yes
@@sebastianlucas704 Thanks! People should be made aware of this so they’re less hesitant to use a Roth
@@sebastianlucas704 thank you
I love that there’s such a thing as “Back Door Roth IRA” and looking forward to learning more about it and other details of Roth IRAs. Great detailed informative video and comparisons, thanks
I'm growing my brokerage account first , then I'll move my profits or div. payments to my ROTH IRA. I know it's not the best strategy but this way , if I need to take out some money for myself, I'll take it from my immediate account.
You should consider establishing the Roth account anyway. You can always withdraw your contributions without penalty, just not the earnings. And the earnings will compound faster in the Roth. Actually it's good to have a balance of account types (regular + IRA + Roth).
@@captsorghum Yes. Right now growing the brokerage one. I'm going to have the same stocks on the ROTH IRA. I didn't know I could withdraw the way you just told me from the IRA. That's very interesting.
Greetings from Alabama! Your channel fills the gaping hole in most UA-cam investing content; tax impacts everything and isn’t adequately addressed in most investing content. It’s not how much you make that counts. It’s what you keep that allows you to build wealth. Well done!
Thanks very much for so detail explination
So married filing jointly gives you a bit over $85,000 of ordinary income before your qualified income starts taking a tax hit. Let that sink in when making determinations about something like Jepi.
Scenario Im aiming for is around $60,000 in ordinary income in semi retirement. 2024 I will be seeing a large amount of that target be from jepi and O. Once I hit that goal I will no longer be investing in anything that provides ordinary income. That $25,000 between my target and the upper bound of the tax brackets Im aiming for will let me possibly have a hobby business or perhaps do some small jobs without too much concern.
Look to use your tax advantaged accounts for this kind of investment. Roth ira or Regular ira. These are not taxed like that. Beware of using thise accounts for investing in MLPs though
@@mikeshuman7393 Oh Im stacking into my roth ira to the limit every year. Tbh Im not even considering that for my calculations. The goal for the roth is total return until I get near 59 and then turn it into something more dividend focused. And yeah the mlp I am invested into is in my regular account. It is a forever holding that I fully expect will pass on to my heirs.
Roth IRA, get it. It's the only way to get tax freedom when you are old.
Im interested to know how these accounts perform in tax advantaged accounts, I would have thought the covered call ETF would have done better in a bear market for Roth IRA, but from the looks of it, doesnt seem so
What about dividends in an HSA? Is that going to be tax free?
Love your videos! I was informed that contributions are withdrawn without paying any taxes. Is this information correct? Thanks
If contributions are put into a Roth IRA withdrawals are tax free as she explained. In a Traditional IRA withdrawals are taxed.
Qualified dividends are great for someone with a very low AGI that wants some tax free income on the side before they reach 59.5 and have full access to their roth Ira tax free.
Perfectly executed explanation in one video. I don’t regret subscribing to your channel. Keep up the good work💯💯💯
So how does the irs knows at what percentage to tax my investment is it form the information on the form the broker sends at the end of the year??
Yes
One can argue this analysis oversimplifies things. For example let's assume SCHD (which I own and keep buying more of on dips) will have higher price appreciation over time than the "gimmicky" (my view of them) high yield investments.. Eventually SCHD holders will sell the shares and need to pay taxes.... unless the owner is dead and stepped up cost basis law still exists. Really need to evaluate total gain after taxes through the whole holding period - the final sale.
I'm hoping my shares will get stepped up cost basis and will be transferred into supplemental needs trust after my death. Haven't met with lawyer yet to evaluate....
Great video!!!! Learned alot thank you!
Where can one typically find data for an ETF that shows what percentage of its total payed out dividends are qualified dividends?
The company should publish it annually and/or show it on your end of year tax form.
Amazing video! Im gladd i started in investing in SCHD💪
Hi, if you make $100k income per year do you pay 15% tax on the full amount of dividends or just a percentage on the amount over the $89k if you are married? Thank you
Percentage over 89k is my understanding. Great question to verify with your tax preparer tho!
will the us government tax foreigner on their dividend income if they invest thru a stick broker but living on other country?
I'd like to know the answer to that question too 😊
Is that 44k dividend income or total income including dividends?
Does short term or long term capital gains tax different on traditional IRA?
Not sure what the difference is, but my SCHD dividends are ordinary not qualified. Same as my JEPI.
No, SCHD is mostly Qualified Dividends. The problem is that when ETF dividends are first distributed, your broker does not know if they are qualified or not, and in what proportion. Typically they will show up on your monthly statement as "Cash Dividends". However, this is resolved for you by the time your 1099s are issued.
@@harrigill Thanks for the clarification
What about dividend income from a traditional IRA? How is it taxed?
As ordinary income when you withdraw it..
excellent video again!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
You should have mentioned that you need to own the Roth IRA for at least 5 years before making any tax free withdrawals.
Taxes on jepi really not that bad
Have it in my Roth 401k ! Won't matter how much I recieve in Divi's !
This video earned a subscriber! Well done
GREAT video Viktoriya, just suggested to my investing buddies.
Would definitely like to see follow-up content on which dividend income flavor (or even down to the ETF, like you did in the comparison on this video) performs best in Roths. Would also love to hear more about how to backdoor Roth in general.
Good runthrough. Thanks!
You didn't mention State Taxes on Capitol Gains...
Right... because every state is different...
С ума сойти можно!
А дивиденды считаются доходом? То есть можно попасть в следующий tax bracket, получив больше дивидендов....