Dividend Taxes Explained (And How to Avoid Paying Them)

Рет қаралды 30,857

Күн бұрын

The worst part about dividend investing is paying taxes on your dividend income. Nobody likes taxes, and although it's something we don't want to have to deal with, unfortunately there's no way around it. However, when it comes to dividend taxes, there are ways you can avoid paying them, which we'll be talking about in this video. I'll be explaining how dividend income is taxed, and will share a couple of ways you can avoid paying taxes on your dividends.
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⏰ CHAPTERS ⏰
0:00 - Intro
0:58 - How Qualified Dividends Are Taxed
4:11 - How Ordinary Dividends Are Taxed
5:40 - Another Way To Avoid Dividend Taxes
6:40 - Inside My Roth IRA
The ideas and opinions presented in this video are meant for informational and entertainment purposes only, are not intended to serve as a recommendation to buy or sell any security in any account, and are not an offer or sale of a security. They are also not research reports and are not intended to serve as the basis for any investment decision.

Пікірлер: 136

@rynewilliams Жыл бұрын

Do you invest in a Roth IRA or any other type of retirement account? Let me know in the comments below! 👇

@Immabeast714 Жыл бұрын

Hey Ryne! (in a perfect world) I max out my contribution to my 401k up to my employer's match. Then I move to maxing my Roth IRA. Everything after that goes into my dividend growth portfolio.

@girldaddividendinvestor Жыл бұрын

Just maxed for '22! Second time ever. Such a cool feeling.

@rynewilliams Жыл бұрын

That's a great strategy my friend!

@rynewilliams Жыл бұрын

That's so awesome, good for you! Hoping to get on your level and do that in '23

@bpignacio Жыл бұрын

Thank you for the reply, Ryne. No, not the Roth IRA. I forgot to mention I’m in Canada so what I have is my RRSP. I haven’t bought any NLY or AGNC yet but I did buy MPLX. I think it has a 9% dividend yield but it’s not a growth stock. I’m older so I might need a good cash flow. Thanks again, Ryne.

@NolanGouveia Жыл бұрын

So much good information Ryne! Bring on the taxes because if I’m paying more taxes that means I’m making more dividends!! Great job explaining the difference between qualified and ordinary dividends 👊 and that ROTH IRA is the real hack. 🎉🎉

@rynewilliams Жыл бұрын

Dude very well said. That is the silver lining of paying more taxes 😂

@Gruder47 Жыл бұрын

Very informative! Thanks for the info Ryne!

@rynewilliams Жыл бұрын

Thank YOU Gruder, I’m glad you got something out of this one 🙌

@miguel_1213 Жыл бұрын

Just in time, Thank you, very valuable information

@rynewilliams Жыл бұрын

Thanks for watching my friend!

@JohnK.11 Жыл бұрын

Found your account on Twitter and you have quickly become one of my favorite channels!!

@rynewilliams Жыл бұрын

Thank you my friend! Appreciate you hopping over to YT to check out the channel

@freelancingartisan 6 ай бұрын

Slick audio set-up -- in conjunction with your informative professionalism. Thank you for posting.

@rynewilliams 6 ай бұрын

Thank you!

@SAGEM1A4Me Жыл бұрын

I've very glad I subbed. I figured the video was going to be like use a roth and rolled my eyes when I clicked the video....yet I learned next year I can go up to 6500 on my Roth now and also a bit about that itemized deduction. Great stuff man keep it up!

@rynewilliams Жыл бұрын

Haha thank you my friend! I’m very glad to hear that this exceeded expectations. Appreciate you taking the time to watch 🙌

@delliott777 Жыл бұрын

Awesome video. What do you think about a future video, to discuss various quality REIT’s? Things seem to be changing rapidly… Great video!

@rynewilliams Жыл бұрын

Yea I think that'd be a great idea. I can try and make one of those next month. Which REITs do you think would be worth talking about?

@stevedancause1329 Жыл бұрын

$O Realty Income

@HN-oq3gf Жыл бұрын

wow great vid

@rynewilliams Жыл бұрын

Thank you!

@gengarphantom6967 Жыл бұрын

This will be the first year filing taxes on my own. I will use turbo tax, super easy to upload csv forms. I’ll share my experience once I get it all done .

@rynewilliams Жыл бұрын

Thanks for sharing Gengar...turbo tax definitely makes it easy. That's how I do it as well

@sshaw107 Жыл бұрын

Ryne- love your videos and education Sessoms. Any way you can share link for tax calculator? Thanks.

@rynewilliams Жыл бұрын

Thank you! And absolutely, here's the link: www.ameripriseadvisors.com/assets/calculators/Tax1040.html

@TheIvyLens Жыл бұрын

I just came across some fun info. The distributions on BST, a somewhat comparable vehicle to JEPI, are classified as long term capital gains which is highly favorable. Another fun fact is that margin loan interest can be itemized if the funds are used for investment purposes. So you could theoretically yield the difference between the cost of the debt against the yield of a closed end fund and build this massive portfolio that just churns, rinse and repeat, where the debt you take on is yielding a higher return than the cost of the debt. Hella risky but fun to imagine. So if you take on the debt during a high rate environment you can write off the rate while you build the position. Reminds me of how banks sell our loans and pocket the difference.

@TheIvyLens Жыл бұрын

@@bizzzzzzle it’s nominal, theoretical, but doable. M1 rates are currently 5.75% whereas BlackRock closed end funds/trusts like BST, BSTZ, and BIGZ are well above. Shorting, Options, House flipping can be easy too but not everyone is doing it, just to counter that last remark.

@rynewilliams Жыл бұрын

Dude good research! I would’ve never known that about margin loan interest

@Bob-ut Жыл бұрын

Great topic to discuss. May want to discuss in the future RMD and how that will effect your taxes and accounts. Thanks for your content.

@rynewilliams Жыл бұрын

Thank you! What's RMD?

@Bob-ut Жыл бұрын

@@rynewilliams required minimum distributions. At present kicks in at 72. Can be a large tax burden depending on where your money is at.

@rynewilliams Жыл бұрын

Ahhh gotcha. There are RMD's for Roth IRA's?

@Bob-ut Жыл бұрын

@@rynewilliams not in Roth account or hsa account. Other Ira accounts yes. I’m a firm believer in transferring money from IRA accounts to Roth if you can afford to do so

@openfor45 Жыл бұрын

@@Bob-ut The new bill just passed increases the age at which individuals must begin taking required minimum distributions (RMDs) from their retirement account to 73 from 72, beginning January 1, 2023. In 2033, the RMD age will increase again, to 75.

@robertm.0034 11 ай бұрын

Great video. Question: In a non retirement account, are dividends taxed differently if i choose to reinvest vs. cash out?

@rynewilliams 11 ай бұрын

Thanks! To answer your question, dividends are taxed the same regardless of whether or not you reinvest them

@javamochafrap Жыл бұрын

VOO's yield is 1.6%. Get JEPI (current yield 11.37%)

@zaalb131 Жыл бұрын

Your SCHD Video got me into your channel because I was deciding how to invest in my HSA. Keep up the good work! I’m about to get a $37k bonus (so $25k after taxes). What would you do if you were in my position? Don’t worry, I have strong opinions of my own and won’t interpret anything as financial advise!

@rynewilliams Жыл бұрын

Thank you my friend! Happy to have you along for the ride. And man idk what I'd do with an extra $25k, definitely would invest a certain portion of that haha, but that's an awesome bonus. Great job!

@zaalb131 Жыл бұрын

@@rynewilliams thanks, it was very exciting and unexpected! Would you just boost your dividend account, go into something riskier or even just QQQ with covered calls, pay off debt, or upgrade lifestyle with a nice vacation/travel, upgrading phones, eating out more, etc?

@striperkid Жыл бұрын

If I had an extra $25k, I'd look into my investments and DCA on any stocks I wish to build on. Kinda spread it around in the portfolio but also leave a chunk on the side for bad market days.

@2ryan_X0 9 ай бұрын

What’s your contributions limit to taxable and Roth ? I know you like cash flow now … just asking for my personal portfolios

@da7135 4 ай бұрын

What tool are you using online? Can anyone use it? Can you post the link?

@Arabian_Epileptic Жыл бұрын

Ryne what do you think about Bonds? They also have decent yields, there isn't a lot of information on how to buy Bonds though

@rynewilliams Жыл бұрын

I honestly don't know too much about bonds, but yea right now they seem to have some decent yields

@CENA896 Жыл бұрын

If you buy bonds directly from the government Treasury direct no taxes on state level but only tax on fed level on the interest but if you buy municipal bonds the interest is tax free

@CENA896 Жыл бұрын

@@calebwert1057 i agree with u just watch on the brokerage firms the fees can add up but other then that you are correct

@DavidSmith-lp5tz Жыл бұрын

Nice overview. Two things: 1). You said that Roth IRA withdrawals were qualified dividends. My understanding is that Roth withdrawals are not taxed regardless. 2). Could you run those numbers with social security and a pension?

@rynewilliams Жыл бұрын

Thanks David. I don’t believe I said Roth withdrawals were qualified dividends. If I did that was a mistake

@aguyinarkansas Жыл бұрын

I have several stocks, some that are oil pipeline stocks, and I receive K-1’s instead of 1099-Div. I think that affected my taxes this year. I’ve got to review it again. Any thoughts? Are they treated differently?

@rynewilliams Жыл бұрын

My understanding is that since the distributions are a return of capital, they are mostly tax deferred. But I could have that mistaken

@anthonyswanner1643 Жыл бұрын

Hey, so since all my dividend stocks/income is in a ROTH, i don’t have to worry about paying taxes?

@rynewilliams Жыл бұрын

That’s correct!

@charlesbailey5579 Жыл бұрын

Don't have a Roth IRA, and currently my only income is from interest and dividends. Unfortunately, I found out that contributions to a Roth IRA have to be from income reported on a W-2. So, instead, I invested $10,000 in I-Bonds, because I don't have to pay taxes on them until I cash them in, and they are free from state taxes.

@rynewilliams Жыл бұрын

Good move Charles!

@bestillsounds1210 Жыл бұрын

Does anyone own a Canadian bank, such as TD bought on NYSE? Please explain how those dividends are taxed for Americans? Thanks

@rynewilliams Жыл бұрын

I’m not quite certain on how they’re taxed but I’ve heard good things about the Canadian banks

@davidclark155 Жыл бұрын

You still have till April to max out for this year for your roth.

@rynewilliams Жыл бұрын

Thanks David! I forget about that haha

@Lcwtex 4 ай бұрын

I’m invested in growth, funds of America and I am given long-term and qualified dividends at the end of every tax year. Do I pay taxes on those even if I I do not withdraw those

@rynewilliams 4 ай бұрын

Yes you are taxed on any dividends you receive unless it's in a tax advantaged account like a Roth IRA

@Duke_of_Prunes Жыл бұрын

I am interested in re-opening my position in EPD (Enterprise Products Partners). Big dividend, and the price is currently attractive. EPD is considered a "limited partnership" and issue a K-1 form every tax season. Do you know is that dividend is "qualified" or not? I actually sold my original shares at a $35 loss, so I never filed the K-1 that year.

@rynewilliams Жыл бұрын

MLP’s are interesting because it’s not even technically a dividend. It’s considered a distribution, which is why you get the k1 form. There are certain tax advantages to this that allow you to not have to pay taxes on these distributions. It’s best to keep MLP’s in a taxable account from my understanding

@Duke_of_Prunes Жыл бұрын

@@rynewilliams Thanks, Ryne. I am leaning towards EPD because the "dividend" looks sustainable. And, they provide many jobs in my town with their gas storage facility.

@rynewilliams Жыл бұрын

That's cool that they're somewhat local to you! EPD overall is a solid company...I've been happy with it in my portfolio

@charlesrivers2647 Жыл бұрын

@@rynewilliamsbro, I found out something very interesting. You can actually have MLPs in a Roth as long as you don’t make more than 1k a year on that MLP…also, you can put XLE which is the ETF of MLPs..

@RustMoments Жыл бұрын

does SCHD pay qualified dividends?

@seansavona545 Жыл бұрын

I believe so

@rynewilliams Жыл бұрын

I believe they do!

@garyschmelzer Жыл бұрын

Hey buddy my wife andwe file jointly and don’t make over 83,000 a year. Will I have to pay taxes I do have robbinhood as my brokerage

@samuelzev4076 10 ай бұрын

Does this apply to foreign investors who invest in the US stock market through an international brokerage?

@rynewilliams 10 ай бұрын

No it wouldn't

@samuelzev4076 10 ай бұрын

@@rynewilliams so foreigners are still taxed for dividends then?

@top_gun_academy Жыл бұрын

So if I receive a dividend from my Roth IRA, can I withdraw that from my account?

@rynewilliams Жыл бұрын

If you’re under the age of 59.5 you’ll incur penalties if you withdraw your dividends

@chrisballUKtoNZ Жыл бұрын

and for all foreigners the tax rate is set at a fixed 30%.... no getting out of that one.

@rynewilliams Жыл бұрын

Man that's very unfortunate

@InvestindoparaLiberdade Жыл бұрын

Hello, I'm from Brazil, I have a wallet there in the United States of 53 thousand dollars. all my dividends are taxed at source at 30%, my question is, do Americans also pay this 30% already at source? that is, when you receive the dividends, do you also have this charge already at the source like us? already grateful.

@rynewilliams Жыл бұрын

Hey there! This is a great question. In America, we're taxed at the end of the year, and the tax rate can vary based on a few different factors. For most of us, the tax rate won't ever get as high as 30%, fortunately.

@paulj2948 3 ай бұрын

How did the over 100k scenario only pay 2k of tax when it was over the 0% threshold? Wouldn't it be 15% tax on all qualified dividends?

@geraldclough2870 Жыл бұрын

He leaves out other income, which most have, not to mention social security which all older have.

@bpignacio Жыл бұрын

Hi Ryne, I’m new to the stock market. Very much interested with high dividend stocks. Before Invest, can you let me know what is wrong with MREITs like AGNC or NLY? Thank you.

@rynewilliams Жыл бұрын

Hey there my friend. I don't really know much about NLY, but AGNC's dividend has been declining pretty steadily over the last 10 years, which is a big red flag to me.

@g.ajemian4968 5 ай бұрын

Does the 0 taxes in retirement also include dividends from Ira accounts?

@rynewilliams 5 ай бұрын

It can!

@g.ajemian4968 5 ай бұрын

@@rynewilliamsis that only a Roth IRA ?

@rynewilliams 5 ай бұрын

@@g.ajemian4968 yes, you can benefit from tax free gains and dividends in a RotH IRA

@dividendfire855 Жыл бұрын

I have a SEP Account (Simplified Employee Pension) from my job, that match’s 5% of my yearly salary, only down side is I have zero control on where it is invested ( Mutual funds ) eww. But hey I contribute nothing so, free money is free money, can’t really complain.

@rynewilliams Жыл бұрын

Haha that’s true. Can you at least see which funds it’s invested in?

@dividendfire855 Жыл бұрын

@@rynewilliams American growth fund ticker AGTHX

@rynewilliams Жыл бұрын

Ahh nice

@arigutman Жыл бұрын

Those who understand the game of taxes have much to gain... Always use tax advantage accounts!

@rynewilliams Жыл бұрын

Absolutely man!

@Eli390 Жыл бұрын

I think they moved it up to 44,000 also what website is that?

@rynewilliams Жыл бұрын

Ahh gotcha. The website is: www.ameripriseadvisors.com/assets/calculators/Tax1040.html

@Eli390 Жыл бұрын

@@rynewilliams thanks great video as always

@ronaldwhite6476 Жыл бұрын

What happened to my 35% rate

@elonmusk859 Жыл бұрын

If I am non US resident and only got less then 41K Qualified dividends I don't have to pay nothing in US? Right? I live outside all the time

@rynewilliams Жыл бұрын

I'm not sure about non US residents

@elonmusk859 Жыл бұрын

@@rynewilliams OK THANKS!

@HosBoba Жыл бұрын

But if you take your divi $$ and reinvest that $$ to buy more of the same stock , you have to pay taxes at the end , and thats the part I hate ,

@rynewilliams Жыл бұрын

I hate it too, nothing we can do about it unfortunately

@sunbreeze3222 Жыл бұрын

Ryne, you still have time to contribute to the Roth until the tax deadline date of 2023?

@rynewilliams Жыл бұрын

Yes I believe that's correct

@tonyaguilar2151 Жыл бұрын

Trust me you'll be maxing out your rothbira in no time😎

@rynewilliams Жыл бұрын

Thanks Tony, I hope you're right!

@getsugatenshoFTW Жыл бұрын

Hey Ryne, you have until April to contribute to your Roth IRA for 2022.

@rynewilliams Жыл бұрын

Thank you my friend! I forgot about that haha

@getsugatenshoFTW Жыл бұрын

@@rynewilliams sure thing!

@delbomb3131 Жыл бұрын

With a progressive tax system we'll never out pay our income. In the grand scheme I'd rather keep paying a little more year after year than no longer continue to raise my income

@rynewilliams Жыл бұрын

I completely agree with you there

@Yaw_Jr 5 ай бұрын

Great content - nicely laid out! For those who are not able to make Roth contributions, consider making them thru your 401k if possible.

@rynewilliams 5 ай бұрын

Thank you!

@danieldeweerd6752 Жыл бұрын

But Sascha said dividends were tax inefficient

@rynewilliams Жыл бұрын

Who is Sascha?

@danieldeweerd6752 Жыл бұрын

@@rynewilliams Yanchin, in his "The Irrelevance of Dividends" video.

@rynewilliams Жыл бұрын

Ooooooh I've seen that video before haha. I mean once you reach a certain point you'll end up paying some taxes for sure, especially if you have active income coming in from your w2 job or something, but if you're retired it takes a lot of dividend income before you actually have to pay taxes on them

@danieldeweerd6752 Жыл бұрын

@@rynewilliams to his credit, he may be talking about UK tax law, but he's talking about American entities and exchanges for most of his videos. I am glad that you highlighted the standard deduction. Most people don't even consider that in wealth planning.

@rynewilliams Жыл бұрын

He could be talking about UK law. I also think taxes on dividends is a low hanging fruit for people who are looking for downsides to this side of investing. People often like to refer to dividend payments as a forced taxable event, or something along those lines.