Is there any difference in the tax model for the interest payment distributions for these two investment strategies? Robinhood gold’s 4.6% interest on unused cash seems great, but if it’s taxable as income it ends up being ~3% after taxes. Based on this I had 2 questions: Q1) Is robinhood gold’s interest payment taxed as income? Q2) Does the same tax policy apply to CDs? If not, how do taxes work on CD distributions assuming it was also a 4.6% CD?
Interest will be considered ordinary income in both cases. Federal, state, local taxes applicable on both
Seems like a no brainer to just put the money in an conservative index fund at the same rate since it’s not taxes yearly but only at withdraw time and at a ltcg rate
It’s about safety, if the Fed’s are guaranteeing you a 5% rate, why would you put money in S&P that doesn’t guarantee this return? (It’s just average 5% yearly)
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Why on earth do you think RH interest is not income? CDs like bank interest are taxed as income.
It’s just weird to think that 5% is a good rate when it’s not compounding since it barely breaks even with target inflation of 2.5% after taxes. A conservative index fund would compound at 5% and only be subject to long term capital gains after you withdraw, as opposed to yearly income tax rates on the interest payments from cd’s/robinhood gold. So if comparing between robinhood gold or a cd at 5% (really 3%) vs an index fund returning 5%, the increase from the index fund is astronomical over a 45 year period I thought I was missing some trick with cd’s/robinhood gold like the real estate gain’s tax exemption for rolling the gains into a new home