Research summary

Greater tax efficiency through equity asset location

October 17, 2023

Two charts plot the added value of placing ex-US equity in a taxable account, in lieu of US equity. The x-axis shows two rows representing different tax brackets: the marginal tax rate (37%, 35%, 32%, 24%, 22%) and the preferred tax rate (24% and 15%). The y-axis represents the annualized added value for the asset location strategy.  The chart on the left assumes ex-US equity has a 60% qualified dividend rate. In this chart all investors with primarily equity or equity-heavy glidepaths will benefit by placing their ex-US equity in their taxable account and US equity in their tax-advantaged account. Investors in the top-three tax brackets (37%/24%, 35%/24%, 35%/15%) with a mix of bonds and equities in their glidepath will benefit from placing their US equities in their taxable account and ex-US equities in their tax-advantaged accounts. The chart on the right has the same scenarios but assumes a qualified dividend rate of 80% for ex-US equity. All investors but those with a 37%/24% or 35%/24% marginal/dividend tax rate and mix of bonds and equity, benefit from placing ex-US equity in their taxable account.


Sachin Padmawar, CFA
Daniel Jacobs, Ph.D.
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