Greetings and Happy Holidays - New member here. Have enjoyed learning Gold immensely.
Apologies as this topic has been discussed a lot. Qualified dividend income, not to be reinvested. To get the amount correct, it looks like I need to do a "percent of a percent" since it is based on gains - do I have that right? My fund generates 1.27% annual yield, so if I assume a taxable account growth, I need to enter a fairly large % for "Growth Taxed Annually as Qualified Dividends" (like 20%) which is arbitrary but gets the Qualified Dividends annual $ to be correct in the AGI table.
Do I have this all correct or is there a preferred way?
Yes, the program wants you to tell it how to divide up the total growth you told it to expect, into qualified dividends (taxed as LTCG), non-qualified dividends (taxed as interest), long term capital gains taxed when withdrawn and tax-free (like Muni bond interest).
I look at my 1099 from the year prior to get a breakdown of qualified dividends vs. non-qualified dividends. My qualified dividends ended up being about 75% of all my dividends. I expect stocks to return about 8%/year (we want nominal here, not inflation adjusted). So using your 1.27% total dividends, I would break out the tax categories as:
1.27/8*0.75 = 12% qualified dividends (taxed as LTCG)
1.27/8*0.25= 4% non-qualified dividends (taxed as interest)
and (8-1.27)/8 = 84% taxed as LTCG when withdrawn
Richard, thanks for that, it makes perfect sense. It's a bit confusing as dividends are not necessarily tied to gains but of course the money has to come from somewhere for a company, long term.
Very helpful. Thanks!!
