The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Gone Fishing on February 13, 2015, 12:53:37 PM
-
I told someone a few years ago that since dividends and capital gains were treated better than wage income from a tax perspective, my goal was to "convert" my wage income into "preferred" income as fast as I could. As I look back on this I realize there are all sorts of policies that "encourage" market participation that include but are probably not limited to the following:
Lower dividend/LT capital gain rates
No SS or Medicaid tax on earnings (for most people)
The majority of 401(k) and IRA options are market based
Low interest rates set by the Fed that drive insured deposits into the market seeking yield
Anymore you can think of?
-
To state the obvious, the external policies that encourage the use of passive income sources over earned income sources are merely adding extra incentives on top of the primary benefit already inherent in passive income: you don't have to work to receive it.
-
I think there is a saver tax break that rewards low income people for contributing to IRAs beyond the normal deductions.
HSA = tax deduction going in, tax free for medical, tax deferred going forward
Tax deferred growth with stocks, annuities, index funds, ETFs. I'm not referring to IRAs. I'm referring to the fact that you can see 'growth' and you don't pay taxes on the growth until you sell it for a gain. You just pay taxes on the dividends.
Step up basis at death.
-
Limited liability share ownership.