Dividend Taxes Explained (And How to Avoid Paying Them)

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.

⏰ 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.

[rynewilliams]

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

[NolanGouveia]

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. 🎉🎉

[freelancingartisan]

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

[JohnK.]

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

[TheIvyLens]

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.

[chrisballUKtoNZ]

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

[davidclark]

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

[miguel_]

Just in time, Thank you, very valuable information

[Gruder]

Very informative! Thanks for the info Ryne!

[delliott]

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

[charlesbailey]

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.

[InvestindoparaLiberdade]

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.

[DavidSmith-lptz]

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?

[SAGEMAMe]

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!

[anthonyswanner]

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

[dividendfire]

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.

[cshades]

Hey Ryne! What is your personal strategy? Do you max out your Roth IRA first and then donate to your taxable brokerage?

[javamochafrap]

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

[bestillsounds]

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

[Bob-ut]

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.