What is the benefit of Qualified Dividends over Long Term Cap Gains?

[live4soccer7]

Let's say I'm married and filing jointly and I'm bringing in 90k in either long term cap gains or I could bring in 90k in qualified dividends. They both would be taxed at 0%, assuming I have no other income.

What could the potential benefit of having one or the other as the source of income?

[bluecollarmusician]

Cap gains have the clear benefit of being able to control when they are realized.  It makes it easier to control income.

Sometimes "unexpected" income shows up- unplanned or unheralded, and you can adjust the cap gains appropriately. Alternatively, you may find that for a particular "year" for "reasons" you want a lower income- in which case you just realize less income.

With Qualified Divs you have less control in that sphere.

From a tax perspective they are treated the same.

[live4soccer7]

Thank you very much for the insight.

[FireLane]

I agree capital gains are more tax-efficient, all else being equal.

However, just to play devil's advocate, here's the case for dividends. They're a predictable revenue stream that puts cash in your pocket today. You can spend it however you want, or reinvest it if you choose.

Capital gains aren't realized until you sell stock, so you're at the mercy of what the market is doing at the time. It might crash the day before you plan to sell. Then you can't realize those gains anymore, even if the company "should" be worth more.

Dividends can also be cut in recessions, but they tend to be less volatile. It's the same idea as the proverb, "a bird in the hand is worth two in the bush".

[bluecollarmusician]

Capital gains aren't realized until you sell stock, so you're at the mercy of what the market is doing at the time. It might crash the day before you plan to sell.

This is a good point, I think it is probably generally true that the less volatile and more stable the underlying security providing the Div, the less likelihood there is of Cap Gains on the security- so there is an element of risk/reward spectrum that might be worth considering.

This is definitely a potential negative of relying on Capital Gains.  However, as you pointed out dividends are generally less volatile, however in the times when you "count of them the most" is when they are most likely to be cut.

IMHO the most likely "best " strategy is reserves/bonds etc. generating interest income ; @live4soccer7 while interest is not tax advantaged like LTCG, you have approx 30k in the standard deduction which could give you a buffer - that plus the cash used to generate it could give you space to avoid selling at unfavorable times...

[live4soccer7]

Thank you all very much for the replies. The points given are all great.

[MDM]

Thank you all very much for the replies. The points given are all great.

How do you plan to use the answers?

[live4soccer7]

Thank you all very much for the replies. The points given are all great.

How do you plan to use the answers?

I'll likely do roughly a 50/50 between the two.