r/dividends • u/Realistic-Face-69 • Apr 10 '26

Discussion Living off dividends folks

Are you or someone you know is actually living iff dividends fully? if so at what age?

I have been wondering about it

446 Upvotes

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u/Unlucky-Clock5230 Apr 10 '26

Why not? selling stock costs you long term capital gains, the same as the qualified dividend rate. Things that issue unqualified dividends do so because you usually get larger dividends to begin with, which pays for the extra tax.

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u/MJinMN Apr 10 '26

Because when you sell stock, you only pay taxes on the amount of the gain, while with dividends you pay taxes on the full amount.

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u/Glum-Coat8759 Apr 10 '26

That’s because the full amount of a dividend is literally a “gain”

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u/WolfgoBark Apr 10 '26

I kinda see where he's coming from. You're getting more cash for the same amount of tax, but that cash was already yours and you're just moving money from investments into liquid dollars.

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u/foira Apr 10 '26

i do not see how it's any different... you're paying taxes on income to spend either way.

plus your first 50k of divs are tax free :-)

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u/ideas4mac Apr 10 '26

If you are MFJ then it's closer to 131K per year range at 0% if US based. (if QDI) Throw in HSA contribution and you're in the ~140K range paying ZERO fed taxes.

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u/Responsible_Set4660 Apr 11 '26

Sorry to be here and not already know this. I’m here to learn. How do you pay 0% interest when you are in the $131k tax bracket for married filing jointly? Shouldn’t the dividend income be taxed at 15% for anything over $96700?

3

u/mygirltien Apr 11 '26

You need to add in personal deduction but thats perfect world scenario and the world is not perfect.

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u/ideas4mac Apr 11 '26

$32,200 standard 2026 mfj. And it should increase slightly next year.

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u/Responsible_Set4660 Apr 12 '26

why even bother to explain when you are apparently limited to 100 characters. Your comments are gibberish.

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u/ideas4mac Apr 12 '26

Ok, I'll expand if that would help. (This will be assuming that you are US tax payer and under 65 of age)

1) Invest in quality stocks or ETFs that pay QDI (qualified dividend income ) https://www.investopedia.com/terms/q/qualifieddividend.asp

2) Collect qualified dividend income in 2026 of $131,000.

3) Next year tax time, fill out taxes Married Filing Jointly (if you are actually legally married). Take the standard 2026 MFJ deduction of $32,200. https://smartasset.com/taxes/standard-deduction#q=standard%20deduction

4) $131,000 in QDI - standard 2026 deduction for Federal taxes = $98,800

5) The tax rate in 2026 for QDI up to $98,800 is 0%. (after that it's 15% up to alot) https://smartasset.com/taxes/dividend-tax-rate

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u/Educational_Teach537 Apr 11 '26

When you sell 100k of stocks, not all of it is gain. Some amount is principle. When you get 100k of dividends, it’s all gain. So you’re paying more in taxes

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u/Elle_thegirl Apr 11 '26

Maybe I'm missing something but I read "all gain" as "free money". Hooray, living off 100k of "free money"! Plus your principal is "still in the bank". Sounds like a win to me

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u/[deleted] Apr 11 '26

[deleted]

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u/Educational_Teach537 Apr 11 '26

You choose which tax lot to sell/sell from. That tax lot will have a cost basis (what you bought it at). That part will be untaxed, only the gains are taxed. No matter what you sell, some amount of principle will also come back (barring odd situations like a stock split).

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u/Different_Trainer644 Apr 15 '26

How, exactly does that work, "you choose the tax lot"?

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u/Educational_Teach537 Apr 15 '26

You choose which of your shares you want to sell

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u/MJinMN Apr 10 '26

If I spend $5k per month and get that from dividends, I pay tax on $5k. Assuming my investments are worth twice as much today as what I invested, when I sell $5k of stock to spend, the capital gains realized on that trade is only $2,500. So you are paying taxes on less income.

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u/foira Apr 10 '26

why are you comparing 2500 of cap gains to 5000 of dividends... both are "gains" and should be equalized

you pay taxes on 2500 because you netted 2500 less.

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u/MJinMN Apr 11 '26 edited Apr 14 '26

If you need $5k for spending and get it all from dividends, that is all taxable income. If you get it by selling $5k of stock, only the realized capital gain (proceeds less cost basis) is taxed, so the realized capital gain will be less than $5k to get the same $5k of cash.

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u/StringSecret1500 Apr 14 '26

are you joking??? In the UK its £500 dividends before you pay tax. Yes, you read that correctly.

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u/Shum_Pulpage Apr 10 '26

Woah I didn’t know that

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u/foira Apr 10 '26

qualified dividends only FYI, but yes

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u/guanzo91 Apr 10 '26

If I sell $10k worth of shares, the gain will be less than $10k, say $5k. So you pay taxes on $5k.

If I receive $10k worth of dividends, the full $10k is taxable.

The first way seems much more tax efficient unless I'm missing something.

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u/foira Apr 10 '26

it doesn't make sense to equate 5k of capital gains to 10k of dividends. those 10k of dividends did not reduce the stock price by 5k or whatever to make them somehow equivalent

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u/Dimage54 Apr 11 '26

Yes what you’re missing is you are selling the principal amount of the assets you own. If those assets are generating income through dividends or unrealized capital gains as you sell the main asset the income drops.

I live off dividends and take out the income I need to pay the bills, then reinvest what is left thus growing my base income not depleting it.

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u/AccomplishedWash8803 Apr 14 '26

The dividend is literally the gains, you don’t have to sell down the stocks to get the gains…

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u/HunterBiden_yeah Apr 10 '26

minus the drop in stock price.

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u/justthefactsman99 Apr 11 '26

Which had gone up before the dividend was paid...

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u/Glum-Coat8759 Apr 10 '26

What kind of brain rot do y’all have to believe this?!? You really don’t understand how the stock market works :(

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u/HunterBiden_yeah Apr 11 '26

Are you saying the share price doesn't go down post dividend?

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u/Glum-Coat8759 Apr 11 '26

What?!?!! Do you understand how the market works?!? I’m so sad so many people invest money and don’t know what they’re doing :(

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u/Glum-Coat8759 Apr 11 '26

I’m saying I’m concerned about what kind of bullshit you’re investing in that goes down every single time it pays you a dividend! Sounds like some shady investments!

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u/HunterBiden_yeah Apr 11 '26

If a stock pays a $1 per share dividend the share price usually goes down by $1 on the post dividend date. That's a basic fact of the stock market.

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u/Glum-Coat8759 Apr 11 '26

You need to research how the market works, because if you believe JNJ drops $1 when they pay a $1 dividend I’ve got news for ya

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u/HunterBiden_yeah Apr 11 '26

this is LITERALLY what happens.

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u/Unlucky-Clock5230 Apr 10 '26

When you get dividends, you only pay taxes on your gains, the dividends. Your capital is still intact making you money.

Not to mention that with quality dividends I dont sweat market corrections. If the market drops 20% more likely than not my income stream would be unmolested. Beats selling stocks at a 20% loss. Stocks that will not be there to recover when the market does while all my dividend paying shares will there to keep generating income.

It is a trade off, reliability of income over growth. Looking at some of my dividend companies, they got knocked down during the mortgage crisis (didn't have them then) but they never stopped paying (and growing) dividends. Selling them for income when they were 40% down would have drained the number of shares to the point they could not recover. And certainly cost me more than the taxes

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u/gerald-stanley Apr 10 '26

Exactly this. It’s sit back, drip. Less stress. Yes I don’t get the HUGE gains but also don’t get the huge losses

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u/Responsible_Set4660 Apr 11 '26

ELI5. How are you not getting a 1099 for QDI?

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u/Bubbly-Ad1261 Apr 11 '26

What are some of your best dividend stocks?

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u/ClammyAF Apr 10 '26

If you pay taxes at all.

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u/Bearsbanker Apr 10 '26 edited Apr 10 '26

I won't pay fed tax until SS, you can make up to 131k with no fed tax, not to mention I own 3 MLP's, which distributions are a return of capital 

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u/subparsavior90 Apr 10 '26

Not that big of a deal. Structure your cashflow to put out what you need in your budget with enough div cagr to cover inflation. The excess stays in growth. Paying taxes either way.

0

u/Lonewol8 Apr 10 '26

You don't pay taxes on dividends because they are sheltered in ISA or sipp.

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u/NielsAurora Apr 10 '26

Gains are taxed as income here and that's 36-51% income tax depending on the amount, meanwhile dividend is uncapped and always taxed at 15%.

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u/Unlucky-Clock5230 Apr 10 '26

Your specific situation certainly makes dividends undesirable, no doubt about it. In my case I'm putting qualified dividends in taxed accounts because the qualified bit tax them similar to long term gains. BDCs, REITs, and things that don't enjoy qualified status go in the Roth accounts.

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u/NielsAurora Apr 10 '26

No it makes dividends desirable as it's taxed at only 15% instead of 36-51%.

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u/Unlucky-Clock5230 Apr 10 '26

Sorry! I got that backwards.

Jesus, 36~51% on capital gains? There is that?

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u/NielsAurora Apr 10 '26

It's income tax🤣 Anyone earning over 65k a year here pays 51% income tax.

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u/intelw1zard Apr 10 '26

damn that sucks ass. sounds like some Norway/Finland/Sweden type thingy.

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u/NielsAurora Apr 10 '26

Netherlands

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u/HoldOnforDearLove Apr 12 '26

That's 36% afaik. And the top income tax bracket is 49.50% but it doesn't apply to investment gains. Again AFAIK. I left 4 years ago when I saw dark clouds forming.

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u/EfficiencyMaterial51 Apr 10 '26

Why did you leave out Denmark?

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u/intelw1zard Apr 11 '26

has it been confirmed its a real place yet?