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Learning, Sharing, and Teaching => Investor Alley => Topic started by: dalekeener on February 08, 2016, 07:28:43 AM

Title: Taxable Account
Post by: dalekeener on February 08, 2016, 07:28:43 AM
I think there has been a post about this, however, I didn't see it.  Having both an IRA and a taxable account, tax wise it would be more beneficial to hold the majority of my bond and reit etf and mutual funds and other income in my ira and equity stocks and  etf's in taxable account. Am I correct about that. I know mutual funds will distribute capital gains at the end of the year that would be taxable where as etf's usually do not. Any guidance in this area would be helpful.

Title: Re: Taxable Account
Post by: Frankies Girl on February 08, 2016, 07:42:52 AM
Think you've got it right. Anything that pays out dividends/cap gains or has a high turnover rate, you want to hold in a tax sheltered account (like an IRA). Tax efficient funds can be placed in taxable accounts.
^good explanations here
Title: Re: Taxable Account
Post by: MustacheAndaHalf on February 08, 2016, 12:59:06 PM
Keep in mind not all assets are taxed the same.  Stock funds provide qualified dividends (when held 60+ days), while bond fund provides ordinary income.  When the yields are close (~2.2%), I'd put the bonds in retirement accounts and keep the tax advantage of those dividends in a taxable account.

Do you have a Traditional IRA or Roth IRA?  Stock funds tend to have noticeable long-term gains, which are taxed differently by each account:
taxable, long-term capital gains has tax advantage
Trad IRA, all gains get ordinary income tax on withdrawal
Roth IRA, gains are not taxed again
Title: Re: Taxable Account
Post by: PhysicianOnFIRE on February 08, 2016, 01:20:46 PM
In general, you are correct and the Bogleheads wiki is a good resource.  The higher your marginal tax rate, the more this matters.

If you are in the 15% bracket, qualified dividends and LTCG are not taxed.

I keep REIT in Roth, bonds in tax deferred, and my taxable has only passive index funds (US and international).
Title: Re: Taxable Account
Post by: spokey doke on February 08, 2016, 02:22:22 PM
It also seems to matter as to how large your taxable vs. tax-advantaged accounts if you a lucky enough to have a taxable account that is many times larger than your IRA, there is only so much room for placing investments that generate more tax liability in the IRA (and vice versa)