Quick Read – Holding O and MAIN in a taxable account at the 37% bracket costs $22,200 annually on $60,000 of ordinary dividend income. – The annual Roth tax advantage on ordinary dividend income, reinvested at 5%, compounds to roughly $730,000 over 20 years. – The analyst who…
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At the 37% top federal bracket, a portfolio throwing off $60,000 in non-qualified dividend income hands the IRS $22,200 every April, before state taxes and before the 3.8% net investment income tax (NIIT) surtax that also applies at this income level. That is the cost of holding REITs, BDCs and other ordinary-income dividend payers in a taxable account when your marginal rate sits at the top of the schedule. This article assumes married filing jointly, where the 37% bracket kicks in above $768,700 of taxable income in 2026.
The math below applies to single filers above $640,600 as well. The Tax Delta: Roth Versus Taxable on $60,000 of Dividend Income Run the same portfolio in both accounts and the gap is permanent. In a taxable account at 37%, $60,000 of ordinary dividend income nets $37,800.