Vanguard Real Estate Index Fund VNQ held in Taxable Accounts

[Golden sunsets]

Question to those in the know: Is holding VNQ in a taxable brokerage fund smart, dumb or neutral?

I started 2020 by buying some VNQ in our taxable brokerage account. We owned some already in our tax advantaged funds, but needed to buy more to rebalance so without giving it a whole lot of thought I bought more in our taxable ac in early January. I then came to the conclusion that holding it in taxable would create ordinary income, as opposed to qualified, so I sold it in the second quarter. Fast forward to reviewing our 2020 1099 for that account and low and behold, practically none of the divy was ordinary or qualified(less than 1%). The divy was either ROC or 199A, 20% of which is a QBI deduction. Seeing that I don't plan to sell any of the stock we own in our taxable, wouldn't holding VNQ in a taxable account make sense? Am I missing anything?

 

[nwsteve]

We sold our VNQ in our taxable account for a couple reasons--one was the dividend flow and two was our Fido brokerage statement was always held up waiting for VNQ to provide final numbers (end of March). Replaced it with better performing Reit eft in tax deferred account.

 

[Animorph]

VNQ always seemed to generate all the oddball tax items I'd seen on the tax forms but never used before. This is the first time I've seen the 199A and deduction, which caused some investigation for me again this year. TurboTax handled it all without a problem, so VNQ hasn't been a big time waster.

The worst thing was that it delayed my 1099-B's every year. I presume that was so Vanguard could figure out where to classify all the distributions. It was one of my bigger tax generators per dollar of investment, but not enough to let that drive the investment decision. It also tended to be one of the latest with end of year dividends, which made hitting an AGI or tax bracket target more difficult.

If you like the investment I'd stick with it. But it is a bit high maintenance.

 

[Golden sunsets]

We sold our VNQ in our taxable account for a couple reasons--one was the dividend flow and two was our Fido brokerage statement was always held up waiting for VNQ to provide final numbers (end of March). Replaced it with better performing Reit eft in tax deferred account.

Wow. End of March is a long time to wait. We received ours around 2/23 this year, which is typical for us.