57.1% TAX savings - Qualified vs Non-qualified Dividends (SCHD, JEPI)

Qualified vs Non-qualified dividends, understanding the difference between these two can help you save upwards of 57% on Tax obligations.

Yes. It's true. Dividends that are qualified have MUCH more favourable taxation laws compared to non-qualified dividends, and the difference is staggering. Qualified dividends reach a maximum taxation rate of 20%, where as non-qualified dividends reach a maximum of 37%.

Qualified dividends are taxed at the same rate as capital gains. However, non-qualified dividends are taxed as regular income.

There are several factors that make a dividend non qualified.
1. dividends from foreign companies, not listed on major US stock exchanges
2. Hedging- any dividend distributed by using hedging techniques, like selling Calls or Put options, is taxed as as regular income. So yes dividends from all covered call ETFs are taxed at regular income rates.

Let's not forget Tax advantaged accounts, like IRA & Roth IRA's.
Understanding the difference between these two can heavily affect your income!

In this video I go through the entire taxation breakdown comparisons, Tax advantage accounts, and also run through various examples so that you can get a better understanding of how dividends are taxed.

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CHAPTERS:
0:00 Introduction
0:36 What is a Qualified Dividend?
0:53 What is a Non-Qualified Dividend?
1:02 What Makes a Dividend Non-Qualified?
2:38 How Qualified Dividends Are Taxed
3:45 Net Investment Income Tax
4:52 How Non-Qualified Dividends Are Taxed
6:20 Strategies to Minimize Annual Tax on Dividends
7:50 Comparing Income AFTER Tax for 3 Different Types of ETFs (Bull Market)
10:40 Comparing in a Bear Market
11:40 The Winner
11:55 Using Tax Advantage Accounts - IRA & Roth IRA
12:13 Traditional IRA Account
12:28 Roth IRA
13:12 MAGI

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This content is for education and entertainment purposes only. Viktoriya is not a financial advisor and does not provide any financial, tax or investment advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves, risk, including the possible loss of principal.

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[ElizabethMorgan-ldyv]

Great breakdown of qualified vs. non-qualified dividends! This really emphasizes the importance of tax-efficient investing. With the market volatility and economic uncertainty lately, I'm focusing more on tax-advantaged accounts like a Roth IRA to maximize savings and reduce tax burdens while investing in solid dividend-paying stocks. Thanks for sharing this!

[HeartHeartBooks]

could you possibly imagine if in your first month of High School you were taught this ?
It would change the life of so many people.
This knowledge is literally PRICELESS!.
I am 65 and an Engineer and am learning things that will make a huge difference in my life in the next five to ten years.
Thanks Viktoriya. This is pure GOLD!

[MarcelinaMakowski]

Exploring U.S stock trading from Australia changed how I view investing. With a 30% surge, I gained about $50, 000 But it also revealed the complexity of its market factors it demands skill and strategy.

[elijahethan]

Now is the right time. If you really want to grow your money and attain financial independence. Start investing, that's the best way to accumulate wealth. Spent my 30s and 40s investing in stock and several multifamily real estates. That’s the best I did for myself as it has consistently beaten my expectations of a return.

[MadDog_Barks]

Probably one of the best explanation on qualified and just income dividend I seen out there. Lady has her act together!

[ljdag]

The best comparison video I have seen. And I have seen dozens. Thank you!!

[JetDriver]

Nice review. This is important stuff, especially if you are investing in different types of accounts - Trad 401(k)/IRA, Roth 401(k)/IRA, and/or taxable brokerage.

[fufucaney]

Thank you Viktoriya, as an ETF junkie myself your channel is a valuable source and your charm is off the charts. Congratulations on your 10k subscribers, you're going up like a rocket. 🚀

[brianb]

I think the statement made at 13:00 is incorrect. The withdrawals from a traditional IRA or 401k are tax as income no matter the source of the gains so there is no advantage between dividend income, interest or capital gains.

[michaelswami]

Thanks for the analysis. One point. All funds that are withdrawn from a tax deferred IRA are taxed as ordinary income, including capital gains and dividends. That’s why I’m not a fan. Additional point: you can withdraw your own contributions to a Roth IRA without penalty at any time. You’re only penalized if you take out the appreciation too soon.

[kentlbrown]

Just ran across you channel. It is one of the best explanations I have seen.

[jray]

I’ve been giving a lot of thought lately to my tax bill next year, and my A-Hole is still sore just thinking about it! 😢 Taxes are a valuable subject to talk about, and my knowledge is nil, so THANKS FOR THE VIDEO! And any future videos on taxes would be appreciated. Man, they really stick it to you at tax time! And you don’t even get a kiss first!

[skittles]

(13:33 Roth IRA clarification—“earnings” cannot be withdrawn until age 59.5, but Contributions Can be withdrawn without penalty. Right?)

[harrigill]

Your statement at 12:58 about IRA accounts is not correct. All funds distributed from a traditional IRA are considered ordinary income and reported on a 1099-R. There is nothing on the 1099-R that indicates whether any of the distribution is from qualified dividends.

[Cary_Shultz]

Viktoriya, new subscriber. Been watching "investment" channels and really like your content. So, subscribed (and smashed the "thumbs up" button, too). In fact, awesome content. Gonna binge watch a bunch of your other uploads.

[ryanmorrissey]

I love how you broke it down to both bull and bear market.

[redsnake]

I really like how you did the math at the end showing the results. I can see your YouTube video growing huge soon. Kudos

[hu]

Thanks for excellent Vid! But I would love to see an encore Vid where you reinvest the dividends. I suspect the covered call ETF (RYLD, XYLD etc. ) may look much better then, because the stronger compounding with the highest yield would take the lead. Thanks!

[mikeshuman]

This review is ok. It covers qualified and unqualified dividends but a HUGE but that she is leaving out is a FACT in the IRS tax code is that long term buy and hold stocks that appreciate in value are not taxed on capital gains in a TAXABLE account aka brokerage UNTIL they ARE SOLD. They are taxed at long term capital gains rates which are 0 15 or 20 percent. Short term capital gains at your normal marginal tax rate if held less than 1 year and 1 day. Qualified dividends have to be US based companies. If you buy stock outside the US like nestle for example you have to pay that country's tax and US income tax as well... BDCs MLPs are also not covered. If she is going to talk taxes please do a deep dive or a multi part video. This can confuse the beginning investors.

[googolmom]

Thank you for braking every step down, I dearly appreciate your talent. 👏🏻👏🏻👏🏻