Hi there, Mustachians. I have a tax situation that I imagine is similar to that of many on the path to FI:
-The new tax law is reducing our taxable income quite a bit, thanks to the larger standard deduction and, starting this year for us, a nice big child tax credit.
-However, we do see quite a bit of dividend income from our index funds in our taxable account.
-Our taxable income from wages alone, after deductions from 401k, HSA, a traditional IRA, and that $24k standard deduction, is amazingly down to $68k or so for 2018. This has me drooling over the possibility that we'll pay $0 tax on (some of) our qualified dividends.
-However, I'm estimating that we'll see something like $15k+ in dividend income, with perhaps 75% of that amount being qualified dividends.
-This would put us over the $77,200 threshold for paying a 0% tax rate on qualified dividends.
Does someone have a good handle on how this dividend income would be handled? I suspect it's something like the dividends that are NOT qualified would first count as regular taxable income (so, taxed at 12% for a married couple filing jointly), then the qualified dividends up to $77,200 would be taxed at 0%, but anything above that would be taxed at 15%?
I'm no tax wizard so would love help from those who have this nailed down!