Model dividends and see their income in reports?

@pps8888

Not sure I understand the question, but the tax topic is complicated, so I will start at the start. Tax law requires you to pay taxes on dividends each year. Some are qualified dividends, meaning you get the Long Term Capital Gains rate, and some are non-qualified, meaning they are taxed as Ordinary Income. Interest is also taxed as Ordinary Income. If you hold stocks or ETF, then when you sell an asset that you owned for more than a year, you pay taxes the Long Term Capital Gains rate on the change in value. In contrast, many mutual funds distribute the Long Term Capital Gains at the end of the year.

You tell this information to the model on the Financial Assets - Asset Class Taxation tab. Setting this up appropriately can be a little tricky. For stocks, I get about 2% dividends from taxable and typically assume 8% growth (including inflation). I invest in ETFs that do not distribute capital gains each year, so I leave the "Growth Taxed Annually as LTCG" blank and enter 75% (which was 1-2/8) in "Growth Taxed as LTCG when withdrawn". So we have 25% left to distribute between "Taxed Annually as Qualified Dividends" and "Growth Taxed as Simple Interest". My 1099s show that about 80% of my dividends are qualified, so I use 80% of 25% = 20% Qualified Dividends and 5% as Simple Interest. For bonds, I plan for no capital gains, so I use 100% as Simple Interest.

At the bottom of the Financial Assets - Asset Class Taxation tab, there is a checkbox that says "Check if interest and dividends are to be re-invested". I would always leave that box unchecked. Any unspent dividends will still be re-invested.

As far as getting a report of that, see Tabular Projections - AGI Detail. Note that the breakdown between types of return was only important for the taxable account, so it is not broken out for Roth or Tax Deferred accounts.

Withdrawals from each account are shown on the Tabular Projections - Withdrawal tab.

@ricke "For bonds, I plan for no capital gains, so I use 100% as Simple Interest."

Is this because you only hold individual bonds rather than bond funds? Or, you hold bond funds that you never intend to sell share of, thus not realizing the LTCG on share growth (if any)?

This is an area that is frequently done wrong, because it's confusing. I'd love to see more responses from folks as to what kind of portfolio they have, and what entries they put in this section.

@hines202

Never held individual bonds, we had some Vanguard Total Bond, BND, in taxable prior to 2022, but had never planned on getting gains beyond the dividends from the funds, so set the LTCG taxes for them at zero. Then 2022 happened, proving that bonds can lose big chunks when unexpected inflation hits, so I'm allergic to planning on having them go up in value.

I tax loss harvested bonds on the way down in 2022-2023, so we would now actually have some capital gains, however, I changed our asset location so now bonds are only in my t-IRA, so it's moot for us. The only fixed income we have in taxable is a few months of money market + checking account.

@ricke I have a similar question as the OP and am also a newbie ;-). I treat the dividends I get from my taxable brokerage account as income and have them "swept" to cash bank account instead of re-investing them.

So I do like you suggest and leave the "Check if interest and dividends are to be re-invested" unchecked on the financial assets taxation tab.

I would then expect the calculated dividends to show up somewhere as either income or withdrawal, but the amounts are only coming back in tax related reports and do not seem to affect cashflow at all. (Checking or unchecking the dividend re-invest box doesn't even seem to affect "Growth of regular investments" calculations)

Thanks, Andre.

Partial answer to my own question and that of the OP:

The manual states that the non-reinvested interest and dividends are contributions to the cash account, but at first I fail to see this in any of the reports. (Below a section from the manual)

Contributions to the cash account are never specified directly by the user and are only done via
PRC’s algorithms. Here is a list of events that result in contributions to the cash account:

....
o growth of the regular investment account that is attributed to simple interest, short-
term capital gains or qualified dividends and that is not reinvested

In some further researching I did find a reporting field "Net withdrawals from cash account" that is not on any of the default reports, and that is where the magic happens. The values of this field changes when you check or uncheck the re-invest dividends checkbox (with the amount of Taxable interest on regular investments plus qualified dividend columns from the AGI report).

Now the only mystery left is : Why does this re-invest checkbox not have an effect on account growth ?

@adenhaan Regarding "the only mystery left: Why does this re-invest checkbox not have an effect on account growth?", this is because account growth is calculated first (as a function of the account balance and the ROR) and subsequently, the portion of the growth associated with interest and dividends is determined. If some portion of the growth amount is not reinvested, then the account balance will reflect that.

Stuart

@smatthews51 thank you, that makes sense. I really like the product you created !

Andre.