VYMI/VIGI in Taxable or Roth - is the foreign tax credit worth it?

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Padawan Investor
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VYMI/VIGI in Taxable or Roth - is the foreign tax credit worth it?

Post by Padawan Investor » Sat Jan 20, 2018 7:17 pm

I'm 33 and interested in the VIGI and VYMI to up my international allocation a bit. Should these be held in my taxable or Roth?

I understand dividend stocks are best protected in a Roth. But in the Intl case, that means you forgo the foreign tax credit benefit. Is the tax credit more valuable then the Roth tax protection?

If I'm currently in a low tax bracket, but will eventually move up, am I right in understanding that currently taxable is best, but later on the Roth? I'm looking for long term here so not sure which route to go when starting out.

Thanks for any advice!

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Tyler Aspect
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Re: VYMI/VIGI in Taxable or Roth - is the foreign tax credit worth it?

Post by Tyler Aspect » Sat Jan 20, 2018 11:17 pm

From 10% tax bracket to 12% tax bracket the foreign tax credit is worth more than US dividend tax. From 22% tax bracket and up the foreign tax credit is worth less than US dividend tax.
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livesoft
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Re: VYMI/VIGI in Taxable or Roth - is the foreign tax credit worth it?

Post by livesoft » Sun Jan 21, 2018 3:19 am

Calculate for yourself. Here's a discussion of how to do that: viewtopic.php?t=208818
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Longtermgrowth
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Re: VYMI/VIGI in Taxable or Roth - is the foreign tax credit worth it?

Post by Longtermgrowth » Sun Jan 21, 2018 3:49 am

livesoft wrote:
Sun Jan 21, 2018 3:19 am
Calculate for yourself. Here's a discussion of how to do that: viewtopic.php?t=208818
It's kind of sad that I've extensively reviewed that thread, calculated foreign tax credit for funds not listed, along with the easily listed qualified dividend income listed from fund providers, and I'm still not positive rather DGS would look better in taxable compared to VWO... :?

livesoft
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Re: VYMI/VIGI in Taxable or Roth - is the foreign tax credit worth it?

Post by livesoft » Sun Jan 21, 2018 4:00 am

^And if one is accumulating shares of VWO and DGS, I imagine both will give one plenty of tax-loss harvesting opportunities which are not part of the tax-efficiency calculations in that thread.
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Padawan Investor
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Re: VYMI/VIGI in Taxable or Roth - is the foreign tax credit worth it?

Post by Padawan Investor » Sun Jan 21, 2018 11:48 am

Thanks for the replies! Since I'm entering the 25% tax bracket, tucking it in my Roth is better than leaving it in my taxable and taking the credit, right?

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