Hi,
@Rags2Riches. Sorry for your loss.
I agree that stock is tax efficient. Fwiw, my understanding is that dividend rates are zero under $39,375 income and 15% over that.
https://smartasset.com/taxes/dividend-tax-rateSo for example if your income is:
32,200 gross salary
45,000 dividends
--------
77,200 total
I think the tax calculation is roughly:
32,200 gross salary
-12,200 standard deduction
---------
20,000 ordinary income subject to tax ==> federal income tax = 9700x10% + 10,300x12% = 970+1236 = $2,206.
https://taxfoundation.org/2019-tax-brackets/ 39,375 size of bracket with zero percent dividend tax rate
-20,000 used for ordinary income
______
19,375 dividends that pay zero percent tax
45,000 dividends
-19,375
--------
25,625 dividends at 15% tax rate
x 15%
--------
$3,844 dividend tax
Total tax:
$2,206 ordinary income tax
$3,844 dividend tax
______
$6,050 income tax liability
I think that VTIAX will record in its 1099-DIV form the details about where the foreign tax is different from US tax, but it will probably be close to the US result. I think (not giving professional advice here!!).
Of course, you could use 401k or traditional IRA type plans to avoid some of the tax. If the above example's ordinary income were reduced by $20,000 due to 401k contributions, ordinary income tax would drop to zero. Dividend tax would drop as below, roughly:
45,000 dividends
-39,375 tax bracket of zero dividend rate
______
5,625 dividends subject to tax
x15%
_____
$ 844 total tax
I will defer to wiser commenters, but like your allocation. Because I think you can keep taxes so low, it might be advantageous to put less in the 529s than you are planning. You can always give them gifts later, but if their life path doesn't end up using the funds for education, the 529 might cause you to suffer a 10% penalty when reclaiming the 529 funds. Just a thought.