Author Topic: Anyone investing in VNQ in a taxable account for diversification purposes?  (Read 864 times)

fund4tomorrow

  • 5 O'Clock Shadow
  • *
  • Posts: 24
I'm curious if anyone is using VNQ for diversification purposes in a taxable brokerage account?  I'm thinking of adding it to VOO/VXUS/VCAIX for diversification. 

I don't have access to a REIT in my 401k and noticed that their were no distributions for this particular ETF, only what appears to be dividends.  This sounds really similar to how VOO works with only dividends. 

If anyone is investing like this, how are your dividends being paid out (as qualified or non qualified) and how your taxes were impacted (if at all) when comparing against VOO?

I'd really like to hear any pros/cons to this if you don't mind.

Thanks!




js82

  • Bristles
  • ***
  • Posts: 469
Re: Anyone investing in VNQ in a taxable account for diversification purposes?
« Reply #1 on: February 09, 2020, 11:53:30 AM »
I have some VNQ in a taxable account.  On my 1099, "dividends" are broken down between 4 categories, with the split fractions based on the 2018 tax year.

Section 199A Dividends: 49.2% of distributions  (These get a 20% reduction in effective taxation under the 2017 tax bill)
Nondividend Distribution(effectively taxable, but not until sale of asset, and then as cap gains): 16.8%
Nonqualified Dividends (effectively 24% for me): 30.1%
Qualified Dividends(15%): 3.9%

Other notes: I have an account through TD Ameritrade(formerly Scottrade).  In a couple previous years I got the initial 1099 (Mid Feb), only to get an amended 1099 with some of the VNQ dividends reclassified in late march/early april.  Since I had already filed my return, this forced me to file a second, amended tax return, which was generally a pain in the ass. (good news: it slightly increased my refund, rather than the other way around).  This was not an issue for my 2018(filed in 2019) return.

Don't know what the breakdown for VOO looks like, but hope the above is useful to you.
« Last Edit: February 09, 2020, 11:58:12 AM by js82 »

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 3877
Re: Anyone investing in VNQ in a taxable account for diversification purposes?
« Reply #2 on: February 09, 2020, 07:57:10 PM »
REITs typically issue higher dividends, and less of those dividends qualify for a lower tax rate.  That's true of VNQ vs VOO.
If there's no 401(k) choices available, do you have room in an IRA?

Mighty-Dollar

  • Bristles
  • ***
  • Posts: 421
Re: Anyone investing in VNQ in a taxable account for diversification purposes?
« Reply #3 on: February 12, 2020, 02:34:20 AM »
I'm curious if anyone is using VNQ for diversification purposes in a taxable brokerage account? I'd really like to hear any pros/cons to this if you don't mind.
Isn't real estate taxed as ordinary income? I know REITS are. If so, enjoy paying those higher taxes.
https://blog.wealthfront.com/tax-efficient-reits-investing/