Author Topic: Putting dividends into your tIra ????  (Read 741 times)

texxan1

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Putting dividends into your tIra ????
« on: December 07, 2020, 07:40:48 AM »
does anyone put there taxable Dividends into there tIra to keep there AGI down???    just thinking that if i could put my roughly 20k worth of Dividends from my Brokerage account ( vanguard) into my tIRA, then i could lessen my AGI in the coming fire years

I really dont need the dividends to use currently, and usually just roll them over but i want to get our AGI down as low as i can and right now, its a disadvantage to have the dividends count..

Thoughts?   

Thanks
TEX

RWD

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Re: Putting dividends into your tIra ????
« Reply #1 on: December 07, 2020, 08:04:23 AM »
I don't believe dividend income can be used to contribute to an IRA. So if you don't have employee, self-employment, or alimony income then you can't contribute to an IRA.

Tangentially related, have you read about tax-efficient fund placement? One of the strategies is to put funds that produce more dividend income in tax-sheltered accounts and low-dividend funds in your taxable brokerage account(s).

NotJen

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Re: Putting dividends into your tIra ????
« Reply #2 on: December 07, 2020, 08:21:45 AM »
Kind of...

I ended up with some earned income this year that I didn't expect.  I need to keep my AGI low for ACA subsidies, and I'm eligible for the savers credit for the first time ever.  So instead of reinvesting some of my taxable dividends in my taxable account, I "reinvested" them in a Traditional IRA, so I could keep my earned income in cash.  It's the same as investing the earned income, and using the dividends to live on.  I'm still not sure if this is optimal (I don't really want to take away from my taxable balance yet), but the amount was small enough that it doesn't really matter in the grand scheme of things.

The max you can invest in an IRA this year is either $6k/$7k per person, or less if your earned income is less.

terran

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Re: Putting dividends into your tIra ????
« Reply #3 on: December 07, 2020, 09:07:44 AM »
This would just be a regular contribution. You can contribute up to $6k/year ($12k if married). You need earned income of at least the amount you contribute. You can only deduct the contribution if your income is under a certain level. If you meet those criteria, then I might contribute to a traditional IRA, although I'd also evaluate Roth vs traditional. If you're retired and doing Roth conversions then it wouldn't really make sense to convert to Roth and contribute to traditional -- better to just convert less and contribute to Roth since those contributions would be available right away instead of waiting 5 years.

texxan1

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Re: Putting dividends into your tIra ????
« Reply #4 on: December 07, 2020, 11:29:09 AM »
Hmmm interesting.. Thanks guys

It makes me think of a few other options..... I want to keep my AGI down for ACA reasons, but it will be atleast 18 months till i will be eligible for Roth at the current time... Just because of what i make, and what they will be giving me when i depart the company in the next few months.... So it gives me time, but i know i will have atleast 60k in passive income for the foreseable future... that consists of about 20k in dividends and the rest from a small business that i own, but dont do any true work at... except pay taxes lol

Thanks for the input, i think once eligible i will open a roth for sure, but also might look into making my very own 401k from my business... I dont want overly complicate my life, but want to make sure i take advantage of my tax situation to make it as efficient as i can

Thanks

 

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