Dividend Taxes

[firehawkocean]

This forum rules. You guys have saved me so much hassle by not getting into that annuity!

Anyway, with the bush tax cuts ending, I am concerned about buying more qualified dividend funds from vanguard.

I will have just under 250k of 1099 income (from Indian Casino revenue - I am a tribal member) once the year is up.

I would love to buy when the market is getting this low. However, I don't think it would be wise to put my money is dividends that will be taxed the hell out of. I have been throwing a bit of money into VCADX, since I live in California.

Any suggestions?

[bjl584]

Rule #1 is to not make an investment decision based on taxes alone.

That being said,
It is unclear if the Bush tax cuts will end completely, end partially, or be extended. Once Washington gets their heads out of their behinds we will have a clearer picture of exactly what will happen.

But,
There are plenty of places to put money that will be tax sheltered. Muni bonds are hot right now. Investors are pouring into them for the same reasons that you stated. They are concerned about taxes.

With your gross income you may not feel the effects of taxes being raised, depending on how much you earn after deductions and write-offs.

[MonkeyMama]

As a tax professional I have absolutely no suggestions (no one knows what the heck the tax situation will be next year, and we probably won't know until well into 2013).

I also agree with bjl. I doubt dividend income on $250k - for a few months while we see where things settle - would amount to taxes of huge significance? & even if it does, it probably makes more sense to make an action plan when we know what tax rates will actually be in 2013. I'd at least hang tight until closer to 12/31 and see where things are trending. If we head into 1/1 with no tax changes, then you might want to assume everything will expire, and can then again re-startegize if things are changed down the road.

One thing is for sure, 2013 tax rates will not be set 1/1/13. They have not even settle the 2012 tax code yet (Um, AMT patch anyone?). The government is getting worse and worse and worse about this every single year. I have no idea what kind of taxes many of my clients will even pay for this freaking year. !! Thinking ahead to 2013 is a fairly useless exercise.

[Petunia 100]

This forum rules. You guys have saved me so much hassle by not getting into that annuity!

Anyway, with the bush tax cuts ending, I am concerned about buying more qualified dividend funds from vanguard.

I will have just under 250k of 1099 income (from Indian Casino revenue - I am a tribal member) once the year is up.

I would love to buy when the market is getting this low. However, I don't think it would be wise to put my money is dividends that will be taxed the hell out of. I have been throwing a bit of money into VCADX, since I live in California.

Any suggestions?

My suggestion is you need an asset allocation plan. With an asset allocation plan, you decide (percentage-wise) how much you want in cash, in bonds, in stocks, etc. Then when you receive "new" money, you aren't making a decision on the fly as to where it should go. The decision has already been made, you just follow through with your plan. And more importantly, investing in a haphazard manner tends to lead to poor long-term results. You don't want that.

If you don't feel comfortable making an asset allocation plan on your own, then look for a good fee-only planner who will help you make one. These sites can help you locate a fee-only planner:

Garrett Planning Network | Making competent, objective financial advice accessible
Fee-Only Financial Advisors Home - NAPFA - The National Association of Personal Financial Advisors

I had no idea the Indian Casino revenue was so large for individual tribal members! That's awesome. Good for you.