The Same $900,000 Dividend Portfolio Could Leave You Thousands More in a Roth IRA

At the 24% bracket, a $900,000 high-yield portfolio paying $59,925 in annual dividends sends $12,767 to the IRS every year. Inside a Roth IRA, a qualified distribution “shall not be includible in gross income” once you reach age 59½ and clear the five-year rule.

Six Income Stocks Split Into Two Tax Outcomes

The model divides $900,000 equally into six $150,000 positions, making a blended yield of 6.66%. In a taxable account, your bill depends on what kind of dividend each stock pays. REITs and BDCs pass through rent and loan income, and most of it is taxed as ordinary income at your full bracket. Altria (NYSE:MO | MO Price Prediction) and Verizon (NYSE:VZ) pay qualified dividends from domestic corporations (26 U.S.C. § 1(h)(11)), which are taxed at capital gains rates. For most filers in the 24% bracket, that rate is 15%.

• Realty Income (NYSE:O): 5.74% yield, $8,610 a year. It pays monthly, has raised its dividend for 115 consecutive quarters, and counts every payment as ordinary income in a taxable account.
• Omega Healthcare Investors (NYSE:OHI): 6.05% yield, $9,075 a year. The skilled nursing REIT raised its quarterly payout to $0.68, and its full payout is exposed to your bracket rate.
• Main Street Capital (NYSE:MAIN): 5.8% yield, $8,700 a year. Its 20th consecutive quarterly supplemental dividend of $0.30 per share adds more ordinary income on top of the regular monthly payout.
• Ares Capital (NASDAQ:ARCC): 10.4% yield, $15,600 a year. This BDC position costs $3,744 in federal tax at 24%, making it the best Roth candidate in the group.
• Altria: 5.68% yield, $8,520 a year. Its dividends are qualified, so the tax drag is lower, but the new $1.11 quarterly payout still compounds faster when no tax comes out.
• Verizon: 6.28% yield, $9,420 a year. Its dividends are also qualified, with a $0.7075 quarterly payout.

The Roth comes out ahead by $12,767 a year. With no growth and no reinvestment, that adds up to $127,674 over 10 years.

Higher Brackets Widen Every Gap

The 37% row taxes qualified dividends at the top 20% rate. These figures leave out state income tax. Realty Income and Omega payouts may also qualify for the Section 199A deduction, which lowers the taxable-account bill on those two REITs. For 2025 income, the 24% bracket applied to joint filers with taxable income from $206,701 to $394,600.

Compounding Turns the Annual Gap Into Six Figures

Reinvest the $12,767 annual difference at a conservative 4%, and the Roth’s lead grows to $153,287 after 10 years and $380,189 after 20. With no compounding at all, the 20-year figure would be $255,348. These numbers assume no stock price gains. They come only from the taxes saved and the income those savings earn. Think of the result as the long-run cost of holding these six stocks outside a Roth.

Three Moves Before Your Next Tax Filing

1. Pull your 1099-DIV and add up the ordinary dividends from any REIT or BDC you own in a taxable account. Multiply that total by your marginal tax rate to estimate your annual cost.
2. If you are considering a Roth conversion, model it using the specific yields above. Compare the one-time tax on converting with the annual tax savings of $11,928 to $19,122 before deciding the upfront cost is too high. The low-tax years between your last paycheck and your first RMD are often when conversions cost the least, a window we sized up in a free Roth guide here.
3. If you convert in stages, compare the annual tax savings on ordinary-income payers such as Ares Capital and Main Street with the lower savings on qualified payers like Altria and Verizon.

Contact [email protected] for any questions or corrections.