12-02-2015, 01:06 PM
(11-27-2015, 05:20 PM)rayray Wrote: It's been a while since I dripped anything not in a tax differed account. I believe in a taxable account you pay taxes on those dripped divi's the year you get them, then you pay any taxable gains when you sell those dripped divi's. If memory serves me correctly, that's why all my stocks that pay a divi in my taxable account go directly to cash in order to keep taxes more simple.
(11-09-2015, 12:02 PM)stewardinlife Wrote:(11-09-2015, 08:44 AM)rapidacid Wrote: For the United States:
Quote:Taxation
Another misconception about DRIPs is that they are not subject to tax because the investor is not receiving a cash dividend per se. In fact, while DRIPs are beneficial for their cost-effective approach to investing, they are still subject to tax. Because there was an actual cash dividend, although reinvested, it is considered to be income and thus taxable. And, as with any stock, capital gains from shares held in a DRIP are not calculated and taxed until the stock is finally sold, usually several years down the road. (For more, check out Capital Gains Tax 101.)
Read more: The Perks Of Dividend Reinvestment Plans http://www.investopedia.com/articles/02/...z3r0AQurAl
Follow us: Investopedia on Facebook
http://www.investopedia.com/articles/02/011602.asp
rapidacid, thanks for the info. I guess it makes sense to DRIP if I am not needing the income for at least 15-20 years, this way, I can also extend/postpone paying taxes every year, and only pay taxes at the time of the stock being sold during retirement years (which actually might put me in a lower tax rate)?
Am I correct with this understanding? Thanks.
Steward, you're paying taxes on the divi's the year you receive them whether you drip them or not, it's still considered income. The only thing you're putting off is the capital gains tax. I'm assuming you're talking about non-retirement accounts.
Thanks rayray. Yes, this is for non-reitrement accounts.