Taxes and nonqualified brokerage account

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don't know why everyone is making this so complicated.

Let's start with the important point that you will not be taxed on the account unless you generate taxable income in the account (dividends, realized gains, etc.) How much you will pay in tax is function of whether the taxable income is long term/qualified or short term/ordinary.

If you are in 24% bracket and MFJ then your income is between $172,751 to $329,850. That makes this easy. Your long term capital gains tax rate is 15%. Any tax on gains (or preferred dividends ) will be taxed at a rate of 15% on the income. Short term gains (positions held less than a year) and ordinary dividends will be taxed at your regular marginal income tax rate (24%).

Holler with additional questions.

Thanks - you're good at explaining this! I do have a follow up question: what determines whether your ETF provides long or short term gains? Can you choose one that only offers long term gains?

Can’t gains push OP and her husband into a different tax bracket.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I don't know why everyone is making this so complicated.

Let's start with the important point that you will not be taxed on the account unless you generate taxable income in the account (dividends, realized gains, etc.) How much you will pay in tax is function of whether the taxable income is long term/qualified or short term/ordinary.

If you are in 24% bracket and MFJ then your income is between $172,751 to $329,850. That makes this easy. Your long term capital gains tax rate is 15%. Any tax on gains (or preferred dividends ) will be taxed at a rate of 15% on the income. Short term gains (positions held less than a year) and ordinary dividends will be taxed at your regular marginal income tax rate (24%).

Holler with additional questions.

Thanks - you're good at explaining this! I do have a follow up question: what determines whether your ETF provides long or short term gains? Can you choose one that only offers long term gains?

Can’t gains push OP and her husband into a different tax bracket.

Yes, but would OP rather make less money?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I don't know why everyone is making this so complicated.

Let's start with the important point that you will not be taxed on the account unless you generate taxable income in the account (dividends, realized gains, etc.) How much you will pay in tax is function of whether the taxable income is long term/qualified or short term/ordinary.

If you are in 24% bracket and MFJ then your income is between $172,751 to $329,850. That makes this easy. Your long term capital gains tax rate is 15%. Any tax on gains (or preferred dividends ) will be taxed at a rate of 15% on the income. Short term gains (positions held less than a year) and ordinary dividends will be taxed at your regular marginal income tax rate (24%).

Holler with additional questions.

Thanks - you're good at explaining this! I do have a follow up question: what determines whether your ETF provides long or short term gains? Can you choose one that only offers long term gains?

Can’t gains push OP and her husband into a different tax bracket.

Yes of course but it's marginal tax rate so always better to make more

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I don't know why everyone is making this so complicated.

Let's start with the important point that you will not be taxed on the account unless you generate taxable income in the account (dividends, realized gains, etc.) How much you will pay in tax is function of whether the taxable income is long term/qualified or short term/ordinary.

If you are in 24% bracket and MFJ then your income is between $172,751 to $329,850. That makes this easy. Your long term capital gains tax rate is 15%. Any tax on gains (or preferred dividends ) will be taxed at a rate of 15% on the income. Short term gains (positions held less than a year) and ordinary dividends will be taxed at your regular marginal income tax rate (24%).

Holler with additional questions.

Thanks - you're good at explaining this! I do have a follow up question: what determines whether your ETF provides long or short term gains? Can you choose one that only offers long term gains?

PP explained that short term gains are for positions held less than a year. If you buy an ETF and sell it less than 1 year after buying it you will pay taxes on any gains at the short term rate. If you hold it longer than 1 year before selling you will pay the long term rate on gains when you sell.

But I believe funds can also distribute long and short term gains as well for any stocks that the ETF itself held and sold within the different time frames At least in my mutual fund, distributions are marked short term distribution cap gain, long term distribution cap gain and dividend/interest.

Op, if you're looking to avoid tax implications, there are a lot of "tax managed" funds out there. I'm less familiar if you're looking to invest in ETFs that intentionally provide dividend income.

This is an advantage of ETFs over mutual funds, they are much less likely to distribute capital gains. Your experience with mutual funds is not the same.

Maybe there won't be short term cap gains, but any index ETF is still likely to have some dividend distribution and some long term cap gains due to rebalancing.

[Anonymous]

There are no tax implications to opening a brokerage account.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I don't know why everyone is making this so complicated.

Let's start with the important point that you will not be taxed on the account unless you generate taxable income in the account (dividends, realized gains, etc.) How much you will pay in tax is function of whether the taxable income is long term/qualified or short term/ordinary.

If you are in 24% bracket and MFJ then your income is between $172,751 to $329,850. That makes this easy. Your long term capital gains tax rate is 15%. Any tax on gains (or preferred dividends ) will be taxed at a rate of 15% on the income. Short term gains (positions held less than a year) and ordinary dividends will be taxed at your regular marginal income tax rate (24%).

Holler with additional questions.

Thanks - you're good at explaining this! I do have a follow up question: what determines whether your ETF provides long or short term gains? Can you choose one that only offers long term gains?

PP explained that short term gains are for positions held less than a year. If you buy an ETF and sell it less than 1 year after buying it you will pay taxes on any gains at the short term rate. If you hold it longer than 1 year before selling you will pay the long term rate on gains when you sell.

But I believe funds can also distribute long and short term gains as well for any stocks that the ETF itself held and sold within the different time frames At least in my mutual fund, distributions are marked short term distribution cap gain, long term distribution cap gain and dividend/interest.

Op, if you're looking to avoid tax implications, there are a lot of "tax managed" funds out there. I'm less familiar if you're looking to invest in ETFs that intentionally provide dividend income.

This is an advantage of ETFs over mutual funds, they are much less likely to distribute capital gains. Your experience with mutual funds is not the same.

Maybe there won't be short term cap gains, but any index ETF is still likely to have some dividend distribution and some long term cap gains due to rebalancing.

Dividends, yes (as with mutual funds) but unlikely to be any capital gains until you sell.