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Financial Planning / Tax Strategies
|Subject: Re: Using ETFs to get Foreign divs in IRAs||Date: 6/1/2013 12:15 AM|
|Author: TMFPMarti||Number: 118652 of 121219|
My question is about how to avoid tax hassles on foreign dividends in an IRA. I have a Roth IRA, but I understand that foreign nations will take hefty taxes out of dividends if the company is domiciled there, but the rules vary by country as some have agreed with the USA to keep their taxes on ADRs low. Switzerland may be a country that is difficult for Americans to deal with, but Great Britain is much easier. So I heard one should just put foreign stocks into taxed accounts, but I want more international exposure plus dividends in my IRA. Can I use country specific ETFs that offer dividends to help?
Maybe I'm missing something, but it seems to me that regardless of the machinations you go through the foreign country is going to take its tax bite out of what you eventually get. You may not be paying it directly and have the "ouch" factor of seeing it itemized, but it's being paid for you somewhere along the line.
Information on treaties is in Publication 901.
The reason for keeping foreign investments in a taxable account is that you can take advantage of the foreign tax credit. Since an IRA is a distinct tax-exempt legal entity, there's no tax to apply the credit to.
REITs don't present a problem in IRAs. In fact, IRAs are a good place to keep them since they tend to throw off a lot of ordinary income.
IMO MLP's rarely present a problem in IRAs, but they also lose their tax-free cash cow aspect.
I think that covers everything except
Is it correct to say that for a Roth IRA, basically, do not put any specific foreign companies in there if you want avoid both a pretty big chunk taken out in foreign taxes and the possible difficulties involved with applying for a partial refund?
I have no idea what partial refund you're talking about. Can you clarify?
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