Tax Deferral

Tax Deferral

Dividends received in tax-deferred accounts are not subject to immediate taxation. Instead, taxes are deferred until withdrawals are made from the account, typically 관련주 during retirement when the investor may be in a lower tax bracket.

  • Example: An investor holding dividend stocks in a traditional IRA does not pay taxes on the dividends received each year. Taxes are deferred until withdrawals begin, potentially lowering the overall tax burden.

Roth Accounts

In Roth IRAs or Roth 401(k)s, contributions are made with after-tax dollars, but qualified withdrawals, including dividends, are tax-free. This can result in significant tax savings, particularly for long-term investments.

  • Example: Dividends earned in a Roth IRA grow tax-free, and qualified withdrawals during retirement are also tax-free, maximizing the net return on investment.

Tax Planning Strategies for Dividend Investors

Effective tax planning can help investors minimize the tax impact of dividend income.

Holding Periods

To qualify for the lower tax rates on qualified dividends, investors must meet specific holding period requirements. Generally, the stock must be held for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.

  • Example: An investor purchases a stock 50 days before the ex-dividend date and sells it 20 days after. The dividends received during this period may not qualify for the lower tax rates, as the holding period requirement is not met.