Minimizing Current Income in Taxable Portfolio

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D-Dog
Posts: 40
Joined: Sun Dec 02, 2007 12:44 am

Minimizing Current Income in Taxable Portfolio

Post by D-Dog » Sat Jan 12, 2019 10:18 am

Is there a consensus on the best way to reduce modified adjusted gross income from a taxable portfolio while remaining broadly diversified in equities?

Certain specific funds? Tax managed funds? Mutual funds vs. ETFs? I'm thinking the answer might be to just hold total stock market, but I'm not sure. My understanding is that municipal bond interest is included in MAGI so municipal bonds would not be a good option.

The point of asking this question is I'm trying to figure out how to reduce MAGI for the purpose of getting ACA premium subsidies.

Thanks!

livesoft
Posts: 64972
Joined: Thu Mar 01, 2007 8:00 pm

Re: Minimizing Current Income in Taxable Portfolio

Post by livesoft » Sat Jan 12, 2019 12:10 pm

I don't think we will ever qualify for any ACA subsidies.

One can calculate how much income a tax-efficient broad market index fund will give you. For instance, Vanguard Total Stock (VTSAX) and Total International Stock (VTIAX). Just look at Vanguard.com for that information. You can also see how a bond fund will do.

As for "tax-managed" and all that, they are not much more tax-efficient than the above and maybe not even as tax efficient.

If you want no income, then investing in BerkshireHathaway stock is often the most recommended option.

I'd be very interested to see what others have to say about all this.
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dbr
Posts: 27905
Joined: Sun Mar 04, 2007 9:50 am

Re: Minimizing Current Income in Taxable Portfolio

Post by dbr » Sat Jan 12, 2019 12:24 pm

Not an expert, but an observation is that qualifying for ACA is about all your income and not just your investment income, which is likely a small part of the total. There are lots of people who are in a situation of earning too much money to qualify for one program or another. Maybe the solution is to just earn less money somewhere. Yes, obviously one would prefer to unneeded distributions rather than reduce actual income, but one should go through the whole picture.

As far as investments, one can buy BRK or tilt to asset classes that have lower dividends. The problem is that TSM already is pretty well tax efficient so if that is getting you into trouble there isn't much left.

I also wait for someone who has a really good idea how to stay under limits for ACA.

FinancialRookie
Posts: 50
Joined: Wed Nov 14, 2018 1:37 pm

Re: Minimizing Current Income in Taxable Portfolio

Post by FinancialRookie » Sat Jan 12, 2019 12:26 pm

dbr wrote:
Sat Jan 12, 2019 12:24 pm

I also wait for someone who has a really good idea how to stay under limits for ACA.
Easy, be poor! :happy

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