Author Topic: Dividends?  (Read 1174 times)

Catica

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Dividends?
« on: December 06, 2018, 07:13:36 PM »
Can someone explain dividends to me and how do I know if I got any dividends and if I need to pay any taxes?  Will Vanguard send me something?

jacoavluha

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Re: Dividends?
« Reply #1 on: December 06, 2018, 07:46:24 PM »
A dividend is a corporation payout out capital to its owners.
Yes vanguard will issue you a 1099-div if you have dividend income in a taxable account.
You could log in to your account and look at transaction history, or a YTD income report.

Catica

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Re: Dividends?
« Reply #2 on: December 06, 2018, 08:04:56 PM »
A dividend is a corporation payout out capital to its owners.
Yes vanguard will issue you a 1099-div if you have dividend income in a taxable account.
You could log in to your account and look at transaction history, or a YTD income report.
If I only have tIRA then I won't be paying any taxes on dividends right now, right?

ILikeDividends

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Re: Dividends?
« Reply #3 on: December 06, 2018, 08:12:04 PM »
A dividend is a corporation payout out capital to its owners.
Yes vanguard will issue you a 1099-div if you have dividend income in a taxable account.
You could log in to your account and look at transaction history, or a YTD income report.
If I only have tIRA then I won't be paying any taxes on dividends right now, right?
Yep.

dividendman

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Re: Dividends?
« Reply #4 on: December 06, 2018, 08:31:04 PM »
Some brokers automatically re-invest dividends (if you selected that preference), otherwise you'll get cash which needs to be manually reinvested.

MustacheAndaHalf

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Re: Dividends?
« Reply #5 on: December 06, 2018, 08:37:48 PM »
"Yep" is a remarkably restrained reply for someone named "ILikeDividends"...

But I wanted to add that if you do invest in a taxable account, most dividends are taxed at a lower rate.  Looking at S&P 500 data from a year or two ago, 100% of dividends were qualified.  Meaning if you held that stock (or mutual fund that holds that stock) for 60+ days, you paid a lower 15% tax rate.  Dividends are more tax efficient than interest in your bank account.

markbike528CBX

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Re: Dividends?
« Reply #6 on: December 07, 2018, 12:16:29 AM »
"Yep" is a remarkably restrained reply for someone named "ILikeDividends"...

But I wanted to add that if you do invest in a taxable account, most dividends are taxed at a lower rate.  Looking at S&P 500 data from a year or two ago, 100% of dividends were qualified.  Meaning if you held that stock (or mutual fund that holds that stock) for 60+ days, you paid a lower 15% tax rate.  Dividends are more tax efficient than interest in your bank account.

In addition for taxable accounts, AND a marginal tax rate of 10 or 15% ie married filing jointly < 77,000 taxable income, dividends for long term >1year holdings are taxed at 0% ( tax free).

Source lines 11 to 20 of the capital gains worksheet. US 1040 instructions , also at gocurrycracker.

Catica

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Re: Dividends?
« Reply #7 on: December 07, 2018, 06:14:23 AM »
"Yep" is a remarkably restrained reply for someone named "ILikeDividends"...

But I wanted to add that if you do invest in a taxable account, most dividends are taxed at a lower rate.  Looking at S&P 500 data from a year or two ago, 100% of dividends were qualified.  Meaning if you held that stock (or mutual fund that holds that stock) for 60+ days, you paid a lower 15% tax rate.  Dividends are more tax efficient than interest in your bank account.

In addition for taxable accounts, AND a marginal tax rate of 10 or 15% ie married filing jointly < 77,000 taxable income, dividends for long term >1year holdings are taxed at 0% ( tax free).

Source lines 11 to 20 of the capital gains worksheet. US 1040 instructions , also at gocurrycracker.

I do have auto reinvest set in my Vanguard account, and it gets reinvested in my tIRA.  Are you saying that if I opened Roth IRA and had Vanguard reinvest the dividends in my Roth IRA and my income < 77,000 taxable income (MFJ).  I would pay no taxes on the dividends? Do I understand it correctly?

terran

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Re: Dividends?
« Reply #8 on: December 07, 2018, 07:41:48 AM »
"Yep" is a remarkably restrained reply for someone named "ILikeDividends"...

But I wanted to add that if you do invest in a taxable account, most dividends are taxed at a lower rate.  Looking at S&P 500 data from a year or two ago, 100% of dividends were qualified.  Meaning if you held that stock (or mutual fund that holds that stock) for 60+ days, you paid a lower 15% tax rate.  Dividends are more tax efficient than interest in your bank account.

In addition for taxable accounts, AND a marginal tax rate of 10 or 15% ie married filing jointly < 77,000 taxable income, dividends for long term >1year holdings are taxed at 0% ( tax free).

Source lines 11 to 20 of the capital gains worksheet. US 1040 instructions , also at gocurrycracker.

I do have auto reinvest set in my Vanguard account, and it gets reinvested in my tIRA.  Are you saying that if I opened Roth IRA and had Vanguard reinvest the dividends in my Roth IRA and my income < 77,000 taxable income (MFJ).  I would pay no taxes on the dividends? Do I understand it correctly?

There are no taxes on dividends in any kind of IRA. You can't have dividends on stock held in a traditional IRA paid to a Roth IRA.

@markbike528CBX is talking about the 0% tax rate on qualified dividends which applies to qualified dividends on stocks held in a taxable account for people under a certain income level (income includes both earned and dividends/capital gains).

markbike528CBX

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Re: Dividends?
« Reply #9 on: December 07, 2018, 08:35:07 AM »
"Yep" is a remarkably restrained reply for someone named "ILikeDividends"...

But I wanted to add that if you do invest in a taxable account, most dividends are taxed at a lower rate.  Looking at S&P 500 data from a year or two ago, 100% of dividends were qualified.  Meaning if you held that stock (or mutual fund that holds that stock) for 60+ days, you paid a lower 15% tax rate.  Dividends are more tax efficient than interest in your bank account.

In addition for taxable accounts, AND a marginal tax rate of 10 or 15% ie married filing jointly < 77,000 taxable income, dividends for long term >1year holdings are taxed at 0% ( tax free).

Source lines 11 to 20 of the capital gains worksheet. US 1040 instructions , also at gocurrycracker.

I do have auto reinvest set in my Vanguard account, and it gets reinvested in my tIRA.  Are you saying that if I opened Roth IRA and had Vanguard reinvest the dividends in my Roth IRA and my income < 77,000 taxable income (MFJ).  I would pay no taxes on the dividends? Do I understand it correctly?

There are no taxes on dividends in any kind of IRA. You can't have dividends on stock held in a traditional IRA paid to a Roth IRA.

@markbike528CBX is talking about the 0% tax rate on qualified dividends which applies to qualified dividends on stocks held in a taxable account for people under a certain income level (income includes both earned and dividends/capital gains).

@terran has accurately restated what I was trying to say.  I was trying to expand on MustacheAndaHalf's comment (the lower tax rate might be zero).

non-taxable accounts (tIRA, Rothschild, 401k, 403b etc)  are free from taxes within that account.  As soon as money in those accounts even peek outside the confines of the account, tax and penalties apply. Transfers between non-taxable accounts are often taxable events.

most actions in taxable accounts trigger taxes.  sale of assets, even to rebuy the same thing in the same taxable account, trigger taxes.  Dividends likewise.   That is why buy and hold performs better than churning the account.

Sugaree

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Re: Dividends?
« Reply #10 on: February 03, 2019, 07:58:50 AM »
A dividend is a corporation payout out capital to its owners.
Yes vanguard will issue you a 1099-div if you have dividend income in a taxable account.
You could log in to your account and look at transaction history, or a YTD income report.

I know that they are not required to send a 1099 if dividends are less than $10 from any one source.  I made like $19 from 4 different ETFs.  I'm assuming I won't get anything from Vanguard.  If I just report $19 worth of ordinary dividends on !y taxes will I be alright?  I'm not really worried about the 25 cents extra taxes and it's not worth my spending the time to figure out the ordinary vs qualified manually.

zoochadookdook

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Re: Dividends?
« Reply #11 on: February 03, 2019, 07:57:28 PM »
I'm kind of new to this and my vanguard Roth IRA dividend has been sitting in my settlement fund unbeknownst to me. Right choice to just reinvest it back into the Roth?

dividendman

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Re: Dividends?
« Reply #12 on: February 03, 2019, 08:39:59 PM »
I'm kind of new to this and my vanguard Roth IRA dividend has been sitting in my settlement fund unbeknownst to me. Right choice to just reinvest it back into the Roth?

Um... the  Roth account is just a container, any dividends from assets in your roth account will and must show up in your roth account. You have little choice but to reinvest it back into something in your Roth. As for what that investment should be, you should allocate it per your asset allocation strategy.

(You can take early withdrawals from your Roth but it's usually not a good idea since you miss out on tax free growth)