Dividend reinvestment, I think I'm doing it wrong.

[Bruno]

Where one would turn off reinvesting dividends is where you are withdrawing taxable funds for spending... why reinvest dividends rather than just reduce the amount of your withdrawal by the amount of the dividend if you take the dividend in cash.

To be clear, in a taxable account dividends are income whether taken in cash or reinvested.

My MYGA annuity will be done in Dec. 2023. I will have till July 2024 before the next MYGA starts paying. I have stopped reinvesting my Divs and CG in my taxable acct. and they go into Fido SPAXX. Then i have been buying or adding to Tbills. Do I just let that money set in spaxx and then just withdrawal it monthly as needed? I also have Tbill that renew each month I could take $2k or 3k from them before renewing. Thanks for any input of the best way to bridge 7 months.

 

[pb4uski]

Any of the above. Money is fungible.

 

[badatmath]

Married people have it good on taxes IMO! Us singles not so much.

 

[pb4uski]

Married people have it good on taxes IMO! Us singles not so much.

I guess you are bad at math after all... or you didn't do your homework and are shooting from the hip.

Go to https://www.irscalculators.com/tax-calculator

Enter in $100,000 of earnings and single status... federal income tax is $14,260.60

Then enter in $200,000 of earnings and married filing jointly... federal income tax is $28,521.00 or $14,260.50 per person.

So now please explain to me how it is that you think that "married people have it good on taxes"?

 

[marko]

I guess you are bad at math after all... or you didn't do your homework and are shooting from the hip.

Go to https://www.irscalculators.com/tax-calculator

Enter in $100,000 of earnings and single status... federal income tax is $14,260.60

Then enter in $200,000 of earnings and married filing jointly... federal income tax is $28,521.00 or $14,260.50 per person.

So now please explain to me how it is that you think that "married people have it good on taxes"?

OK, but if I'm using the calculator correctly, $100,000 MFJ is around $8239. To me, that is a more fair comparison income vs income. I don't see how doubling the income and dividing by two is a fair comparison. You're taxed on income, not a per person rate. Then again, I'm "horribleatmath" so I'm ready to stand corrected.

 

[EastWest Gal]

Two people eat double the food, flush the toilet twice as often, take double the showers, have twice the clothes, etc, as one. It’s not exact, but you get the idea. The cost of living is more for two than it is for one. You cannot compare a single person making $100,000 to two people making $100,000 in total, as the same for tax purposes. You have to look at it on a per capita basis.

 

[marko]

Two people eat double the food, flush the toilet twice as often, take double the showers, have twice the clothes, etc, as one. It’s not exact, but you get the idea. The cost of living is more for two than it is for one. You cannot compare a single person making $100,000 to two people making $100,000 in total, as the same for tax purposes. You have to look at it on a per capita basis.

True, but cost aside, the TAX on $100k is different for married vs single.

 

[pb4uski]

OK, but if I'm using the calculator correctly, $100,000 MFJ is around $8239. To me, that is a more fair comparison income vs income. I don't see how doubling the income and dividing by two is a fair comparison. You're taxed on income, not a per person rate. Then again, I'm "horribleatmath" so I'm ready to stand corrected.

If two individuals who live together and earn $100k each pay the same tax as a married couple that makes $200k combined, then how is that unfair?

Both households have the same income and pay the same amount of tax.

 

[marko]

If two individuals who live together and earn $100k each pay the same tax as a married couple that makes $200k combined, then how is that unfair?

Both households have the same income and pay the same amount of tax.

OK. Help me out here because I'm missing something.

Single person earns $100k. Pays $14k in taxes.

Married couple. Husband doesn't work, wife makes $100k. Pays $8k in taxes.

How is that not a marriage benefit?

 

[pb4uski]

A MFJ couple gets twice the standard deduction that an individual gets and that is what drives the difference you are referring to above.

The taxable income for the tax brackets are twice the individual amounts for a MFJ couple.

The system is designed so a MFJ couple that has twice the income of an individual pays twice as much tax. Seems fair to me.

 

[marko]

A MFJ couple gets twice the standard deduction that an individual gets and that is what drives the difference you are referring to above.

The taxable income for the tax brackets are twice the individual amounts for a MFJ couple.

The system is designed so a MFJ couple that has twice the income of an individual pays twice as much tax. Seems fair to me.

Thanks. Does seem fair, but there is a benefit to being married (tax wise anyway) if there is only one earner.

 

[LarryMelman]

I have been reinvesting dividends in my taxable account for over a decade. So I have literally thousands of little positions with their own cost basis.

When the time comes that I want to start withdrawing dividends for cash to live on, it seems to me that it could be better tax-wise to cash out any positions that have tax losses. Tax on new dividends is owed regardless of whether I reinvest them or withdraw them, so why not try to reduce the overall tax burden.

I would have to look at the particular numbers of course, but this is why God invented spreadsheets. I am curious to know if anyone else has taken this approach.

 

[orbops]

One thing no one mentions in this thread is that not paying taxes on dividends up to $83K for married couples still will impact monthly premiums for Marketplace insurance. My monthly Bronze premium would increase from $10/month to about $750/month until I qualify for Medicare if I tried to get near the $83K cap.