From 24/7 Wall St. · Chris Lange · · 1m 10s
Telecom Dividends Taxed Hard: Roth Strategy Boosts Savings
Roth strategy saves $9,600 yearly on telecom dividends after tax.
In brief
Roth strategy saves $9,600 yearly on telecom dividends after tax. Taxing telecom dividends in taxable accounts costs more than 15% of income; Roth placement avoids this tax drag for US qualified dividends. Originally reported by 24/7 Wall St..
Telecom Dividends Taxed Hard
A fat telecom yield in a taxable account quietly surrenders a chunk of itself to the IRS every single year.
Roth vs. Taxable Math
A $500,000 position in a stock yielding 8% generates $40,000 annually. At 24% federal bracket, taxable account produces $30,400 after tax while Roth keeps full $40,000.
Roth Advantage
The Roth advantage is $9,600 per year, every year, compounding permanently.
Telecom Dividend Types
Qualified dividends from US C-corps get long-term capital gains treatment in taxable accounts. Foreign-issuer distributions and ordinary-income dividends do not.
BCE Dividend Tax
BCE dividends to US holders face 15% Canadian nonresident withholding tax, generally not recoverable in Roth IRA.
Cogent Communications
Cogent Communications posts 11.6% yield but quarterly payout collapsed from $1.015 to $0.02 with negative stockholders’ equity.
Roth Priority Order
Place BCE in Roth first, then sequence VZ, CMCSA, T, TMUS into Roth in yield order after verifying coverage.
What it means
Taxing telecom dividends in taxable accounts costs more than 15% of income; Roth placement avoids this tax drag for US qualified dividends.
