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Holding BDCs and mortgage REITs in a Roth IRA saves up to $19,200 annually in federal taxes for a 24% bracket filer.

Market News
03 Jun 2026
24/7 Wall Street
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Bullish
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A married couple in the 24% federal tax bracket earning $80,000 from BDCs and mortgage REITs in a taxable account pays $19,200 in federal taxes annually. Holding these investments inside a Roth IRA avoids this tax, allowing the full $80,000 dividend income to grow tax-free. Over 10 years, this shelter can preserve about $192,000 in income, and over 20 years, nearly $384,000, thanks to compounding reinvested dividends. Investors should consider converting these holdings to a Roth IRA to maximize tax efficiency, especially since these dividends are taxed at ordinary income rates and do not qualify for lower dividend tax rates.

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