2016 Relative Tax Efficiency

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2016 Relative Tax Efficiency

Postby triceratop » Sat Jan 21, 2017 2:50 pm

This is Pt. II of Relative tax efficiency including Foreign Tax Credit (VSS, VWO, VBR, etc.), with numbers for the 2016 tax year. The google spreadsheet link is here.

Currently there is only information for Vanguard funds + ITOT/IJS; iShares foreign tax information should come out in early February. For visuals, I'll start things off with results for my tax bracket: Image

I'll update it with iShares, Fidelity, Schwab, and WisdomTree data as the information is released. Requests are welcome, but I will arbitrarily decide the funds are important. This is easy for you to add to, anyway!

Enjoy!
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Re: 2016 Relative Tax Efficiency

Postby livesoft » Sat Jan 21, 2017 2:55 pm

Ooooh! Can I get the first request in please? But first: Thanks for doing this!

Request: Can you rank these investments in one line as in
Least tax < Most tax
VEA < VOO < VEU < VXUS < VTI ….
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Re: 2016 Relative Tax Efficiency

Postby triceratop » Sat Jan 21, 2017 2:57 pm

I just added ITOT.

livesoft wrote:Ooooh! Can I get the first request in please? But first: Thanks for doing this!

Request: Can you rank these investments in one line as in
Least tax < Most tax
VEA < VOO < VEU < VXUS < VTI ….


You mean automagically based on the results yielded from values you enter in B2-B4? Sure, but I need to go read up on how to do that :)
edit: this is easier than I thought.
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Re: 2016 Relative Tax Efficiency

Postby triceratop » Sat Jan 21, 2017 4:07 pm

livesoft wrote:Ooooh! Can I get the first request in please? But first: Thanks for doing this!

Request: Can you rank these investments in one line as in
Least tax < Most tax
VEA < VOO < VEU < VXUS < VTI ….


It's in the current sheet; but I put it in a single column "line" rather than a row as you indicated; it just looks fugly to have the list spread across the sheet: that's now how the spreadsheet gods intended for them to be used!

Now, a nice thing to do might be to sort within asset classes?

edit:the sort doesn't update when information is changed. fixed!
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Re: 2016 Relative Tax Efficiency

Postby ray.james » Sat Jan 21, 2017 4:35 pm

I was surprised at VSS yield. It is basically a mid cap value fund! dividend yield above 3% when dollar is so strong is surprising for a small cap fund!
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Re: 2016 Relative Tax Efficiency

Postby Good Listener » Sat Jan 21, 2017 4:38 pm

What about a more typical situation of say 28% bracket and thus 15% QDI?

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Re: 2016 Relative Tax Efficiency

Postby grabiner » Sat Jan 21, 2017 4:42 pm

I found two errors in the tax calculations.

You pay US tax on the withheld foreign taxes. For example, VWO paid $0.90 per share in dividends, and $0.11 in withheld foreign tax. You are taxed on a dividend of $1.01, not $0.90. This will slightly increase the tax cost of the international funds.

VGIT is exempt from state tax; this is not reflected in the spreadsheet, which computes state tax on the whole dividend yield. (BND is partially exempt in some states but not all.)

Also, I would suggest deducting state tax from federal tax (either always, or at least as an option by default). Most investors who pay state tax and have taxable investments itemize deductions. The tax cost of an 8% state tax is only 6% if you are in the 25% federal tax bracket.

triceratop wrote:Now, a nice thing to do might be to sort within asset classes?


Agreed. In particular, stock and bond tax costs are not directly comparable. A stock fund has the additional tax cost of the capital-gains tax when you sell it; this may be zero if you donate it to charity or leave it to your heirs, or a moderate extra cost if you sell years in the future. A bond fund will have little or no capital gain when sold.
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Re: 2016 Relative Tax Efficiency

Postby livesoft » Sat Jan 21, 2017 4:43 pm

Thanks, but even with the update I don't think the sort is quite working correctly.

But my taxable assets have a negative weighted average tax efficiency. If the spreadsheet is correct, I'm getting paid more than $50 annually for my taxable holdings [plus the benefits of tax-loss harvesting]. It would be even more if I didn't have any VBR in taxable, but VBR is not going anywhere because 80% of it is gains.

@Good Listener: What about it? Download the spreadsheet and plug your own numbers in. :beer
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Re: 2016 Relative Tax Efficiency

Postby triceratop » Sat Jan 21, 2017 5:12 pm

livesoft wrote:Thanks, but even with the update I don't think the sort is quite working correctly.


I originally made the modifications in a private copy of the sheet. I forgot to copy the changes over; the changes were there when you made your comment, but perhaps you did not see. It appears to work for me, anyway.

grabiner wrote:I found two errors in the tax calculations.


Thanks! I didn't know about treasury funds being state tax-exempt. Awesome.

You can only deduct state taxes if you itemize deductions, as you say; I don't do that so my spreadsheet doesn't need it. Also I was reading some proposed legislation and it seemed that this deduction may be going away...

As for foreign dividends -- this is the same calculation as I did last year so everyone missed it? Yep, you're right! I cannot believe I missed that all this time.

All fixed; thanks again! Of course, it makes only a very small difference.
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Re: 2016 Relative Tax Efficiency

Postby ofckrupke » Sat Jan 21, 2017 5:12 pm

grabiner wrote:Also, I would suggest deducting state tax from federal tax (either always, or at least as an option by default). Most investors who pay state tax and have taxable investments itemize deductions. The tax cost of an 8% state tax is only 6% if you are in the 25% federal tax bracket.


As noted above, some investors do not itemize; additionally some are subject to AMT and need to use their actual marginal rate, typically including an AMT-exemption phaseout effect, under that regime in the federal cell. If the effect of itemized deduction is incorporated into the cell formulae in row 16 (presently), then these AMTers and non-itemizers need to enter their state marginal rate divided by (one minus their actual marginal federal rate) in the state-rate cell.
Quite possibly, it's the majority who should be asked to employ some thought in the use of a tool.

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Re: 2016 Relative Tax Efficiency

Postby 2beachcombers » Sun Jan 22, 2017 1:16 pm

As for foreign dividends -- this is the same calculation as I did last year so everyone missed it? Yep, you're right! I cannot believe I missed that all this time.
All fixed; thanks again! Of course, it makes only a very small difference.[/quote]


I could not see your changes wrt US tax paid on foreign tax? Were the changes made on the Google spreadsheet? oops--forget it------ :mrgreen: Found your new additions to the Spreadsheet(adding FT paid to distribution components

And thanks for your update and have made it easy to do our own marginal tax rates.

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Re: 2016 Relative Tax Efficiency

Postby triceratop » Sun Jan 22, 2017 2:39 pm

grabiner wrote:Agreed. In particular, stock and bond tax costs are not directly comparable. A stock fund has the additional tax cost of the capital-gains tax when you sell it; this may be zero if you donate it to charity or leave it to your heirs, or a moderate extra cost if you sell years in the future. A bond fund will have little or no capital gain when sold.


I have been thinking about how to do this. You would want to extrapolate the current n-year average of tax efficiency for a forward estimate. Then the variables would be expected rate of return, number of years to compound, and withdrawal marginal rate (charitable contributions are a negative rate I think). For Roth that might be zero and etc for IRAs.

This is certainly doable. Did I miss anything? Tax loss harvesting is difficult to account for and perhaps best to leave as a tiebreaker.
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Re: 2016 Relative Tax Efficiency

Postby livesoft » Sun Jan 22, 2017 3:39 pm

For some folks in the 15% marginal income tax bracket where they don't pay income tax on qualified dividends, then I believe there may be issues actually being able to claim the full credit for foreign taxes. This may occur if the taxpayer has at least $20,000 in foreign source qualified dividends and no longer qualifies for the "Adjustment exception."

In practical terms, that means that one's taxable account should not be 100% filled with foreign funds if the taxable account gets large.
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Re: 2016 Relative Tax Efficiency

Postby Doc » Sun Jan 22, 2017 4:34 pm

triceratop wrote:
grabiner wrote:Agreed. In particular, stock and bond tax costs are not directly comparable. A stock fund has the additional tax cost of the capital-gains tax when you sell it; this may be zero if you donate it to charity or leave it to your heirs, or a moderate extra cost if you sell years in the future. A bond fund will have little or no capital gain when sold.


I have been thinking about how to do this. You would want to extrapolate the current n-year average of tax efficiency for a forward estimate. Then the variables would be expected rate of return, number of years to compound, and withdrawal marginal rate (charitable contributions are a negative rate I think). For Roth that might be zero and etc for IRAs.

This is certainly doable. Did I miss anything? Tax loss harvesting is difficult to account for and perhaps best to leave as a tiebreaker.


I calculate the "effective LTCG tax rate" for assumed CG ROI and length of the investment for my anticipated tax bracket and add it to my ordinary dividend tax.

For example for a 25% ordinary tax rate & 15% LTCG rate you get the following effective LTCG tax rares:

Code: Select all

Rate of Return ->   6%   8%   10%
Term         
10   12.07%   11.29%   10.59%
20   9.60%   8.44%   7.49%
30   7.77%   6.52%   5.58%


This is the "annualized' tax rate you would pay if you held the position for the time specified.

So for a assumed ROR of 7% and a 20 year time holding period your effective tax rate is about 9%. (Note just eye ball the number. No need to calculate.) If you assume a 2% dividend you just add that in. This is the same method of calculation that Grabiner(?) used in his spreadsheet in the Wiki just presented in a different manner,)

Again eyeballing the addition of the dividends you have a LTCG tax of 81 bps plus another 50 bps tax on the div for a total of 131 bps on a total return of 9%.

Compare this with bond fund yielding 5% dividend with a 250 bps tax.

The hooker in this scheme is Grabiner's position that he is never going to sell his equities but gift them or pass them on to his heirs and the result changes drastically. (Just add a hundred year term to your table.)

Note that 20 years is an investing lifetime. Twenty year accumulating and another 20 withdrawing means if you start at 45 (you finally paid off your mortgage and sold off the kids) you need to die at 85.

Make the calc for you anticipated tax rates. Record the table and then throw away your spreadsheet. You can do all the necessary calcs in your head or at least with a basic calculator.

(I would keep the spreadsheet used to make the table in case if when my tax rate changes drastically.)
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Re: 2016 Relative Tax Efficiency

Postby triceratop » Sun Jan 22, 2017 5:47 pm

Thanks Doc, excellent thoughts that I'll incorporate. I appreciate it. I'll only note that in my case I expect to have 40+ years until retirement (at least, full retirement age) so 20 years just about gets me to your 45 yr old case where the investor begins worrying about this analysis. So this matters a huge deal for me since my investing horizon is perhaps 60 years.
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Re: 2016 Relative Tax Efficiency

Postby grabiner » Sun Jan 22, 2017 5:59 pm

triceratop wrote:
grabiner wrote:Agreed. In particular, stock and bond tax costs are not directly comparable. A stock fund has the additional tax cost of the capital-gains tax when you sell it; this may be zero if you donate it to charity or leave it to your heirs, or a moderate extra cost if you sell years in the future. A bond fund will have little or no capital gain when sold.


I have been thinking about how to do this. You would want to extrapolate the current n-year average of tax efficiency for a forward estimate. Then the variables would be expected rate of return, number of years to compound, and withdrawal marginal rate (charitable contributions are a negative rate I think). For Roth that might be zero and etc for IRAs.


The way I estimate this cost on the wiki page Tax-efficient fund placement is to assume that after-tax dividends are reinvested, the fund will be sold after N years, and tax will be paid at the appropriate rate. Suppose that the pre-tax return is r, which includes a dividend yield of d taxed at a rate t, and r-d of unrealized appreciation. In that case, a fraction (r-d)/(r-dt) of the gain is taxable, taxed at a rate t'. Now, annualize that tax cost over N years.

Initial value: 1
Tax-free value: (1+r)^N
Final pre-sale value: (1+r-dt)^N
Capital gain: G=((1+r-dt)^N - 1)*(r-d)/(r-dt)
Tax on capital gain: Gt'
Final after sale growth rate r'=[(1+r-dt)^N-Gt]^(1/N)
Annualized tax cost: 1-(1+r')/(1+r) (or just r'-r for consistency with other computations).

For example, suppose your fund grows by 8% annually, with a 2% qualified dividend yield. The growth rate in a taxable account is 7.7%, and 6/7.7 of the gain is taxable. In 30 years, $1 invested becomes $9.2570, and of the $8.2570 in gain, $6.4480 is capital gain with a tax due of $0.9672. Thus the post-sale value is $8.2898, for a 7.30% annual growth rate. The tax cost is 0.70%, or more precisely 1-(1.0730/1.0800)=0.65%. (The 0.37% on the wiki is the additional cost on sale in addition to the base cost of 0.30%; 1-(1.0730/1.0770) is 0.37%.)

I recommend using a slightly lower cost estimate in practice. Since stock returns are risky, you shouldn't make a plan which will require you to sell all your taxable stock if the stock market has its average returns; you'll have some to leave to heirs. On the wiki page, I suggest assuming 5% stock returns when estimated the tax costs of sale, as you are more likely to sell all your taxable stock if returns are that low.
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Re: 2016 Relative Tax Efficiency

Postby Doc » Mon Jan 23, 2017 1:33 pm

grabiner wrote:The way I estimate this cost on the wiki page Tax-efficient fund placement is to assume that after-tax dividends are reinvested, the fund will be sold after N years, and tax will be paid at the appropriate rate.

Several years ago I "checked" into David's spreadsheet in detail. Except for some small compounding differences we get the same results. The reinvestment assumption is an alternate method but is gets you to the same place. Any "real" differences in the two approaches are much, much less than the return assumptions used.

FWIW I don't reinvest dividends in taxable accounts so the reinvestment methodology is a non-starter for me.
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Re: 2016 Relative Tax Efficiency

Postby grabiner » Mon Jan 23, 2017 11:34 pm

Doc wrote:
grabiner wrote:The way I estimate this cost on the wiki page Tax-efficient fund placement is to assume that after-tax dividends are reinvested, the fund will be sold after N years, and tax will be paid at the appropriate rate.

Several years ago I "checked" into David's spreadsheet in detail. Except for some small compounding differences we get the same results. The reinvestment assumption is an alternate method but is gets you to the same place. Any "real" differences in the two approaches are much, much less than the return assumptions used.

FWIW I don't reinvest dividends in taxable accounts so the reinvestment methodology is a non-starter for me.


I don't directly reinvest dividends in taxable accounts either, but the dividends go into my money-market fund, and when the money-market fund gets big enough, it gets reinvested into one of my taxable stock funds. This is essentially equivalent to reinvesting dividends directly.
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Re: 2016 Relative Tax Efficiency

Postby Ethelred » Fri Feb 17, 2017 10:37 am

ofckrupke wrote:
grabiner wrote:Also, I would suggest deducting state tax from federal tax (either always, or at least as an option by default). Most investors who pay state tax and have taxable investments itemize deductions. The tax cost of an 8% state tax is only 6% if you are in the 25% federal tax bracket.


As noted above, some investors do not itemize; additionally some are subject to AMT and need to use their actual marginal rate, typically including an AMT-exemption phaseout effect, under that regime in the federal cell. If the effect of itemized deduction is incorporated into the cell formulae in row 16 (presently), then these AMTers and non-itemizers need to enter their state marginal rate divided by (one minus their actual marginal federal rate) in the state-rate cell.
Quite possibly, it's the majority who should be asked to employ some thought in the use of a tool.

Thanks for pointing this out.

We are, unfortunately, one of many taxpayers in the 35% equivalent marginal rate bracket due to the AMT exemption phase-out. Can anyone confirm that this puts our capital gains rate at 30.8% (= 20% cap. gains + 3.8% net investment income tax + 7% increase from AMT phase-out)? Thanks.

Then again, the important tax efficiency is controlled by marginal tax rates when we are in the drawdown phase. And who knows what they will be then?

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Re: 2016 Relative Tax Efficiency

Postby Phil DeMuth » Fri Feb 17, 2017 11:27 am

Ethelred --

Kitces says yes:

"In an AMT environment, the primary planning opportunity is actually to manage income around the AMT “bump zone” – that span of income where the AMT exemption is phased out, temporarily boosting AMT rates (and capital gains rates!) by an extra 7%."

and

"notably, the AMT exemption phaseout “surtax” applies for capital gains as well, which are still subject to the usual four capital gains brackets but are also bumped even higher due to the AMT exemption phaseout (e.g., the 15% capital gains rate still applies for AMT purposes, but may be boosted to 21.5% as a result of the AMT exemption phasing out), which means it’s also appealing to avoid capital gains in the AMT bump zone and harvest them for those who are above the threshold."

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Re: 2016 Relative Tax Efficiency

Postby Ethelred » Fri Feb 17, 2017 11:39 am

Phil DeMuth wrote:Ethelred --

Kitces says yes:

"In an AMT environment, the primary planning opportunity is actually to manage income around the AMT “bump zone” – that span of income where the AMT exemption is phased out, temporarily boosting AMT rates (and capital gains rates!) by an extra 7%."

and

"notably, the AMT exemption phaseout “surtax” applies for capital gains as well, which are still subject to the usual four capital gains brackets but are also bumped even higher due to the AMT exemption phaseout (e.g., the 15% capital gains rate still applies for AMT purposes, but may be boosted to 21.5% as a result of the AMT exemption phasing out), which means it’s also appealing to avoid capital gains in the AMT bump zone and harvest them for those who are above the threshold."

Yes, I think I glanced through the same article. I'm pretty sure this means that any portfolio rebalancing in taxable would cost far more than any potential gain.

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Re: 2016 Relative Tax Efficiency

Postby BrandonBogle » Fri Feb 17, 2017 12:05 pm

Just a stupid question. Is "tax efficiency" in the spreadsheet a scenario where "lower is better"?

In my head, I had it the other way around, but then BND would be more tax efficient than VTI and that can't be right.

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Re: 2016 Relative Tax Efficiency

Postby triceratop » Fri Feb 17, 2017 4:45 pm

BrandonBogle wrote:Just a stupid question. Is "tax efficiency" in the spreadsheet a scenario where "lower is better"?

In my head, I had it the other way around, but then BND would be more tax efficient than VTI and that can't be right.


Yes. The meaning of the tax efficiency number is this: multiply tax efficiency by $ dollars in taxable account. This will equal the marginal tax increment paid to IRS for that investment.
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Re: 2016 Relative Tax Efficiency

Postby BrandonBogle » Fri Feb 17, 2017 5:09 pm

triceratop wrote:
BrandonBogle wrote:Just a stupid question. Is "tax efficiency" in the spreadsheet a scenario where "lower is better"?

In my head, I had it the other way around, but then BND would be more tax efficient than VTI and that can't be right.


Yes. The meaning of the tax efficiency number is this: multiply tax efficiency by $ dollars in taxable account. This will equal the marginal tax increment paid to IRS for that investment.


:) How much I'm paying as a drag against return makes sense. Thanks!

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Re: 2016 Relative Tax Efficiency

Postby boglephreak » Fri Feb 17, 2017 5:18 pm

any way to get same info for a higher tax bracket? say 33 fed, 9.3 state (CA). excel spreadsheet wouldnt let me edit.

edit: thanks for doing this. i relied on your same info in 2016 for my fund location.

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Re: 2016 Relative Tax Efficiency

Postby BrandonBogle » Fri Feb 17, 2017 5:19 pm

boglephreak wrote:any way to get same info for a higher tax bracket? say 33 fed, 9.3 state (CA). excel spreadsheet wouldnt let me edit.


With the spreadsheet open, go to File and choose "Make a copy". Then edit the rate fields to your heart's content. Keep in mind any AMT considerations as mentioned earlier in the thread.

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Re: 2016 Relative Tax Efficiency

Postby triceratop » Fri Feb 17, 2017 5:39 pm

Updated: iShares foreign funds added: IXUS, SCZ, IEMG, EEMS, EFV ! MSCI EAFE Value looks beautiful.
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Re: 2016 Relative Tax Efficiency

Postby avalpert » Fri Feb 17, 2017 5:56 pm

triceratop wrote:Updated: iShares foreign funds added: IXUS, SCZ, IEMG, EEMS, EFV ! MSCI EAFE Value looks beautiful.

EFV looks less good in higher tax brackets but in general the ishares funds look better than their vanguard counterparts - to the point where it can overcome the er difference even before considering things like IJS's better capture of the small/value space.

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Re: 2016 Relative Tax Efficiency

Postby ofckrupke » Fri Feb 17, 2017 6:05 pm

Ethelred wrote:We are, unfortunately, one of many taxpayers in the 35% equivalent marginal rate bracket due to the AMT exemption phase-out. Can anyone confirm that this puts our capital gains rate at 30.8% (= 20% cap. gains + 3.8% net investment income tax + 7% increase from AMT phase-out)?


It appears to me that the top of the AMT exemption phaseout is intended to coincide (for households without large adjustments beyond the schedule A lines anyway) with a non-LTCG/QDIV income level that marks the beginning of the 39.6% bracket and 20% LTCG/QDIV taxation in the regular scheme. As well, this income threshold from the regular tax is injected into the calculation of LTCG/QDIV taxation under AMT, via line 49 of form 6251 part III. As a result, probably very few households find themselves in both the AMT bump zone and the 20% capital gain regime; much more likely it is one or the other: 15+3.8+7 xor 20+3.8+0. I think you have to wargame your own situation to figure out whether you are even close to the doubly misfortunate intersection.

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Re: 2016 Relative Tax Efficiency

Postby boglephreak » Fri Feb 17, 2017 6:14 pm

BrandonBogle wrote:
boglephreak wrote:any way to get same info for a higher tax bracket? say 33 fed, 9.3 state (CA). excel spreadsheet wouldnt let me edit.


With the spreadsheet open, go to File and choose "Make a copy". Then edit the rate fields to your heart's content. Keep in mind any AMT considerations as mentioned earlier in the thread.

thank you. vti still more tax efficient than vxus at higher tax rate.

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Re: 2016 Relative Tax Efficiency

Postby raven15 » Sat Feb 18, 2017 8:31 pm

triceratop wrote:Updated: iShares foreign funds added: IXUS, SCZ, IEMG, EEMS, EFV ! MSCI EAFE Value looks beautiful.

Thanks for updating Triceratop! I will be doing some changing in my taxable accounts to reduce future taxes. I have taxable accounts at both Vanguard and Fidelity, so the list of funds I have been considering includes all of the ones you listed. This helps a lot. Hmmmm.... EFV vs SCZ...
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Re: 2016 Relative Tax Efficiency

Postby Ethelred » Sun Feb 19, 2017 1:47 pm

ofckrupke wrote:It appears to me that the top of the AMT exemption phaseout is intended to coincide (for households without large adjustments beyond the schedule A lines anyway) with a non-LTCG/QDIV income level that marks the beginning of the 39.6% bracket and 20% LTCG/QDIV taxation in the regular scheme. As well, this income threshold from the regular tax is injected into the calculation of LTCG/QDIV taxation under AMT, via line 49 of form 6251 part III. As a result, probably very few households find themselves in both the AMT bump zone and the 20% capital gain regime; much more likely it is one or the other: 15+3.8+7 xor 20+3.8+0. I think you have to wargame your own situation to figure out whether you are even close to the doubly misfortunate intersection.

Yes, you're right, thanks. Our effective LTCG / QDIV rate is 25.5%, not 30.8%.

But realizing it's so high generates other questions. I'll post these separately.

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Re: 2016 Relative Tax Efficiency

Postby Ethelred » Sun Feb 19, 2017 3:20 pm

So, this thread has made me realize that our effective LTCG / QDI rate is really high, due to AMT, as well as our marginal income tax being really high.

I therefore have a question: what, if any, level of income tax and long-term capital gains tax during the accumulation phase would push you to invest most or all of your fixed income allocation in municipal bonds in taxable, in order to minimize taxes on qualified stock dividends? Is it as simple as wanting to do this when your current marginal LTCG rate exceeds your average income tax rate in retirement?

For our personal situation, our current effective marginal rates are 35% income tax and 25.8% long-term capital gains / qualified dividend tax, due to the AMT exemption phase-out. In retirement, I envisage that our marginal rates under current rules will be 25% on income and 15% on LTCG and our average rate about 17% on income and maybe 10% on LTCG. I think the right retirement comparison is average rate not marginal, or more precisely average rate above social security and any defined benefit pension. Can anyone help me do this calculation?

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Re: 2016 Relative Tax Efficiency

Postby Doc » Mon Feb 20, 2017 8:07 am

Ethelred wrote: I think the right retirement comparison is average rate not marginal, or more precisely average rate above social security and any defined benefit pension. Can anyone help me do this calculation?

I consider marginal rate to be the tax paid on the last x dollars of income divided by x. X may be $1 or any other amount you choose like your RMD for example.

To get the number use a tax software program. I use TurboTax.
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Re: 2016 Relative Tax Efficiency

Postby Ethelred » Mon Feb 20, 2017 8:18 am

Doc wrote:I consider marginal rate to be the tax paid on the last x dollars of income divided by x. X may be $1 or any other amount you choose like your RMD for example.

To get the number use a tax software program. I use TurboTax.

Yes, I use TaxAct. Thanks. I'm afraid that wasn't the help I was looking for though. What I'm not clear about is how I make the comparison of the different long-term asset location cases, and what values to use for the inputs, such as percentage growth of qualified dividends versus growth from gain in stock value.

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Re: 2016 Relative Tax Efficiency

Postby MikeMak27 » Wed Mar 08, 2017 10:52 am

Any chance you could add IEI and IEF? I plan to use these in a modified 3 fund / Larry portfolio hybrid! Thank you so much for your contribution to this forum!!

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Re: 2016 Relative Tax Efficiency

Postby Chip » Wed Mar 08, 2017 11:34 am

triceratop wrote:I'll update it with iShares, Fidelity, Schwab, and WisdomTree data as the information is released. Requests are welcome, but I will arbitrarily decide the funds are important. This is easy for you to add to, anyway!

Enjoy!


Here are the numbers for FNDF and SCHF, assuming you want to add them. The expense ratios are last year's. The new ones, recently announced, are .07 and .25.

Code: Select all

Ticker                           SCHF        FNDF
Expense Ratio                   0.08000    0.32000
Dividend Distribution / share   0.71310    0.60840
STCG Distribution / share       0.00000    0.00000
LTCG Distribution / share       0.00000    0.00000
Foreign Tax Paid $ / share      0.06324    0.05920
QDI Ratio                       0.89860    0.98840
12/31/15 price                 27.56      23.82   


I noticed that Yield on the spreadsheet is the distribution yield (after foreign tax is paid). I don't know about everyone else, but I'd prefer the gross yield, before any taxes.

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Re: 2016 Relative Tax Efficiency

Postby triceratop » Wed Mar 08, 2017 11:35 am

MikeMak27 wrote:Any chance you could add IEI and IEF? I plan to use these in a modified 3 fund / Larry portfolio hybrid! Thank you so much for your contribution to this forum!!


I certainly could, but as there were no capital gains distributions in the past several years and the funds are purely treasury funds, why can't you simply calculate an after-tax yield?
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Re: 2016 Relative Tax Efficiency

Postby triceratop » Wed Mar 08, 2017 11:36 am

Chip wrote:
triceratop wrote:I'll update it with iShares, Fidelity, Schwab, and WisdomTree data as the information is released. Requests are welcome, but I will arbitrarily decide the funds are important. This is easy for you to add to, anyway!

Enjoy!


Here are the numbers for FNDF and SCHF, assuming you want to add them. The expense ratios are last year's. The new ones, recently announced, are .07 and .25.

Code: Select all

Ticker                           SCHF        FNDF
Expense Ratio                   0.08000    0.32000
Dividend Distribution / share   0.71310    0.60840
STCG Distribution / share       0.00000    0.00000
LTCG Distribution / share       0.00000    0.00000
Foreign Tax Paid $ / share      0.06324    0.05920
QDI Ratio                       0.89860    0.98840
12/31/15 price                 27.56      23.82   


I noticed that Yield on the spreadsheet is the distribution yield (after foreign tax is paid). I don't know about everyone else, but I'd prefer the gross yield, before any taxes.


I was just thinking about Schwab yesterday. Do you have a good link to a resource for all Schwab funds, for the complete 2016 year and including all necessary tax info?
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Re: 2016 Relative Tax Efficiency

Postby Doc » Wed Mar 08, 2017 11:49 am

triceratop wrote:Do you have a good link to a resource for all Schwab funds, for the complete 2016 year and including all necessary tax info?

I didn't look but I expect everything you need is here.
https://www.csimfunds.com/public/csim/home
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Re: 2016 Relative Tax Efficiency

Postby triceratop » Wed Mar 08, 2017 11:58 am

Doc wrote:
triceratop wrote:Do you have a good link to a resource for all Schwab funds, for the complete 2016 year and including all necessary tax info?

I didn't look but I expect everything you need is here.
https://www.csimfunds.com/public/csim/home


I ask because I have not previously been able to find a full-year listing of foreign tax credit information for Schwab funds; this may only be available on the 1099-DIV forms for investors. A quick glance doesn't yield any results on that page either.

Schwab's website is, um, not helpful in this area.
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Re: 2016 Relative Tax Efficiency

Postby Chip » Wed Mar 08, 2017 12:09 pm

triceratop wrote:I was just thinking about Schwab yesterday. Do you have a good link to a resource for all Schwab funds, for the complete 2016 year and including all necessary tax info?


I don't think you can get all of it. It was very difficult for me to find anything with Google. I can't even remember how I eventually got there.

Try this: https://www.csimfunds.com/public/csim/home/for_financial_professionals/analysis_commentary

It's still not conveniently in one place. To get distributions, scroll down the page and click on each ETF symbol, then on the distributions tab. QDI percentage for all ETFs is in the link in the center column labeled "Qualified Dividend Income (QDI) in Performance....".

I haven't yet found a source for foreign tax paid. The info I provided came from my 1099-DIV.

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Re: 2016 Relative Tax Efficiency

Postby triceratop » Wed Mar 08, 2017 12:18 pm

Chip wrote:
triceratop wrote:I was just thinking about Schwab yesterday. Do you have a good link to a resource for all Schwab funds, for the complete 2016 year and including all necessary tax info?


I don't think you can get all of it. It was very difficult for me to find anything with Google. I can't even remember how I eventually got there.

Try this: https://www.csimfunds.com/public/csim/home/for_financial_professionals/analysis_commentary

It's still not conveniently in one place. To get distributions, scroll down the page and click on each ETF symbol, then on the distributions tab. QDI percentage for all ETFs is in the link in the center column labeled "Qualified Dividend Income (QDI) in Performance....".

I haven't yet found a source for foreign tax paid. The info I provided came from my 1099-DIV.


Exactly, this is consistent with what I found a few months ago when looking. There is some information in the annual report but it is listed by fund tax year which does not align with investor tax year in all cases. :annoyed
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Re: 2016 Relative Tax Efficiency

Postby Doc » Wed Mar 08, 2017 12:55 pm

triceratop wrote:
Doc wrote:
triceratop wrote:Do you have a good link to a resource for all Schwab funds, for the complete 2016 year and including all necessary tax info?

I didn't look but I expect everything you need is here.
https://www.csimfunds.com/public/csim/home


I ask because I have not previously been able to find a full-year listing of foreign tax credit information for Schwab funds; this may only be available on the 1099-DIV forms for investors. A quick glance doesn't yield any results on that page either.

Schwab's website is, um, not helpful in this area.


Just use 8%. If it' turns out to be 10 or 6 it is still in the roundoff error. Last year it was ~9% for both the LC & SC.

Don't try to get over precise with the effective tax rate. Any reasonable estimate is likely going to have less error than the error in the dividend itself. And it will be different next year and the year after. You are not going to sell equities in a taxable account in order to move the bad tax actors to tax advantaged. I consider anything within 20 to 30 bps to be a wash when looking at tax efficiency.
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