Greetings, friends. For the past 4 years I’ve shared the Go Curry Cracker tax returns to showcase how the Four Principles of Tax Free Living are applied in the real world.
I violate Principle #1 myself, which means I get to file additional tax forms, namely the Schedule C, Profit or Loss From Business (Sole Proprietorship). This is of course good fun.
It would be a shame to keep all of these good times to myself, so this year let’s explore the GCC business taxes. In doing so, I will reveal all of the juicy details on how I make (and spend) money blogging.
Schedule C
In business, income minus expenses equals profit, obviously. For sole-proprietors (and LLCs taxed as such) each of these are reported on the Schedule C, with both self-employment and income taxes being due on the profit (if applicable.)
As long as you are profit seeking and continually and regularly involved in an activity, it is a business, and each business gets a Schedule C.
I’ll review this line by line.
Part I – Income
2016 was a decent year for GCC, with total revenue of $34,916. This gets reported on Line 1 of the Schedule C. Since I’m not selling any products, this is the only information entered in Part I.
The IRS doesn’t ask for detailed information on revenue sources, but I’ll tell you anyway. (The IRS already knows, since every company who paid us more than $600 issues a 1099.)
Revenue came from 8 different sources, primarily from products and services that we regularly use and love. The majority of direct income is from Personal Capital, credit card referrals, and Google Adsense.
Personal Capital – $19,000 (great cash flow and investment tracking tool. And it is free.)
Credit cards – $4,782.50 (FREE travel! Last year we saved $10,000 on flights & hotels)
Google Adsense – $4,043.22 (context based ads)
Amazon.com – $1,306.39 (books and stuff)
FlexOffers & CJ – $499 (hotels, Turbotax, etc…)
Traveling Mailbox – $345 (digital mailbox, read my review)
Betterment – $300 (this was surprising)
Capital One 360 – $260 (our default cash account)
Other – $4,380
Total – $34,916
Most interesting to me (and maybe other bloggers) is the Other category. This is income from other people’s sites and blogs. Both Personal Capital and FlexOffers share revenue when you refer new affiliates.
So… if you aren’t already, sign up to become a Personal Capital affiliate or a FlexOffers affiliate. It is the gift that keeps on giving, with more than 10% of GCC total revenue.
Part II – Expenses
Expenses come in many different forms, and the IRS asks a business owner to highlight 23 different expense categories (plus one more reserved for future use.) GCC had a total of $6,530 in expenses in 2016, about 20% of total revenue.
Advertising – Line 8
I spent $325 experimenting with advertising on Facebook. This definitely drives a noticeable uptick in views coming from Facebook, but whether it is worth it or not is still TBD.
Commissions and Fees – Line 10
Winnie has a much larger audience on her Facebook page (Chinese only) but a smaller following on her blog (also Chinese only.) We put a single ad on her blog via my Adsense account this year, which then paid me after which I paid her. Total commissions: $212. (This is claimed on a separate Schedule C.)
Contract Labor – Line 11
I hired two contractors this year for a total outlay of $306. The first I found on Fiverr and paid $6 for some logo design work, which I subsequently tossed in the (digital) trash.
The second contractor is Jr to whom I paid $300 for his modeling work on the blog / Facebook / Instagram. He contributed 100% of this to his Roth IRA. Photos with him get more Instagram likes than photos without, so there is a traffic/revenue boost from his services.
Depreciation etc… – Line 13
Depreciation is one of the most powerful tools for income / expense shifting for tax minimization. This year we claimed depreciation of $1,296.
The majority of the photos on this site and Instagram come from 2 important business assets, a new Sony a7ii mirrorless camera (with 2 lenses) and an iPhone 7 Plus 256 GB. Total cost: $5,033.
I could have completely expensed all of this cost this year, which would have saved 15.3% in self-employment taxes and 10% income tax. Instead, I used a Section 179 deduction of $450 on the phone (the shortest expected useful life item) and normal depreciation of $470 on the rest. We also had $366 in depreciation on existing assets (my laptop, etc…)
Why shift the deduction into the future? I expect income (and our tax rate) to be higher in 2017. A deduction next year is worth more than a deduction this year.
Other Interest – Line 16b
I paid $181 in credit card fees for processing 2016 estimated tax payments and our 2015 self-employment tax bill.
“You paid $181 for the privilege of paying taxes?” you may ask. Yes I did. I value the $10,000 in free hotels and flights more than I value $181. ymmv
Legal and Professional Fees – Line 17
My brokerage (Fidelity) provides a free copy of Turbotax but the additional forms for business income came with a $66 fee. This is 100% deductible.
I also paid $8 for membership in a Financial Fitness organization. Coincidentally, this also allowed me to open a bank account at a credit union that allowed an initial deposit from a credit card (more points) and paid a $150 signup bonus (more cash.)
Total fees: $74
Office Expenses – Line 18
I paid $1,973 in office expenses. Most of this was for mailing list management. If you aren’t already on our mailing list, you can sign up right here.
For most of the year I was using Mailchimp (paid $713) but I switched to ConvertKit in Q4. I liked it so much that I paid a whole year in advance ($1,208.)
I’ve also started using Google Office ($6), Quickbooks Self-employed ($0 this year), and purchased copies of AdRotate ($27) and CSS Hero ($19.)
Last year I paid 3 years of web hosting through Bluehost, so no deduction this year, but they’ve been doing a fine job running this blog for 4.5 years now.
Supplies – Line 22
This includes a couple notebooks, some SD cards, a lens cap, misc cables, and $2 for a tape measure to measure my home office size. Total: $253
Taxes and Licenses – Line 23
An annual license for Photoshop costs $131 nowadays.
Travel, meals, and entertainment – Line 24
I like travel, food, and entertainment, so this is one of my favorite line items.
Our trip to FinCon in San Diego was a business expense, as was our stay in LA to meet with ABC TV. This set us back $1,039 (Line 24a.)
We happened to eat during our stays in these places. Total: $163 (Line 24b.)
Utilities – Line 25
I spent $386 on the business use portion of various SIM cards as we traveled and for home Internet in Taiwan.
Other expenses – Line 27
This is the catch all category for all of the stuff I forgot to include on the previous lines. $142 is for the business use portion of our Traveling Mailbox mailing service (review.) The remaining $49 is for various purchased photos, printing services, document mailing, etc…
Other Expenses
While we were hanging out in Taipei I converted our spare room into a home office. This allows me to write off $327 of our rent and utilities (Line 30.)
As a business owner, I also get to write off the cost of health insurance. We paid $600 last year into the Taiwan health system for Winnie & Jr. This appears on Line 29 of the 1040.
Other Tax Minimization Options
I touched briefly on how depreciation allows us to time shift income for tax minimization. In 2016 we could have claimed anywhere from $0 to $5,033 in expenses for new assets.
In addition to depreciation, we have the option to make tax deductible contributions to a solo 401k and an IRA. In 2016 I made an $18,000 contribution to my Roth solo 401k and we made his/hers contributions of $5,500 each to individual Roth IRAs. Roth contributions aren’t deductible, of course.
In addition, I could have made deductible employer contributions to the solo 401k of up to 20% of blog profit ($5,677.)
All together, we could reduce taxable income by up to an additional $39,710. That is a lot of flexibility in the tax minimization game.
Summary
The Schedule C form for a sole-proprietor is fairly straight forward, and is primarily a summary of Income, Expenses, and Profit. By going line by line through the GCC Schedule C, hopefully it sheds light on how a blog can earn an income, normal blogging expenses, and how a business is taxed.
While more paperwork is a bummer, having a business provides a great deal of flexibility and tools for tax minimization. Expenses that may be normal personal expenses become a valid business deduction, such as cell phone purchase costs (for Instagram and blog management), credit card fees for tax payments, and a home office. It also provides additional tax shelter / deferral options with a solo 401k.
Aren’t Taxes Fun?
Interested in starting your own blog? Our step-by-step guide can get you up and running in 30 minutes for less than the price of a monthly latte.
Thanks so much for sharing this tool for us “newbie” bloggers. I have a pretty good handle on our taxes up to this point, but I was just starting to research the blog business taxes. As usual, I’ve bookmarked another post of yours for re-reading this summer after I early retire and have more time to put into the blog.
This was phenomenal. Who do you use for your solo 401k administrator? Looks like Bogleheads & White Coat Investor recommend Fidelity due to the availability of roll-ins. http://whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/. I haven’t looked into this before, but this will become relevant in event that I ever have self-employment income.
I use Etrade for Roth access. The only other Roth solo 401k provider I found when I set it up was Vanguard, but the fees were higher. It is on my list of topics to write about.
What fees are you talking about from Vanguard? Do you mean the expense ratio of the funds in your solo 401k? Or, do you pay a fee because it’s a Roth solo 401k rather than a traditional solo 401k? I’ve had a traditional solo 401k with vanguard for 3 years now, and I don’t pay any fees. Granted, the expense ratios for the same funds in this account are higher than what I pay in my rollover IRA; but it’s due to the fact that vanguard doesn’t have admiral shares in the solo 401k’s like I have access to in my rollover 401k.
The expense ratios are too high.
Wow, you are super transparent. That’s awesome..
My favorite part of about this post is the income to fund the Roth IRA for your youngest contractor.
At a 10%/year, this contribution will be worth $263K in 70 years ( however will have the purchasing power of $28K today at a 3% annual inflation rate)
Sort of takes the migraine that is Schedule C away… very cool and surprising how nice that Other category is. Thank you for fleshing out your business dealings, and love the transparency.
Thanks for the great post!
Can you provide more information about your “Credit Cards” Income? Is this affiliate income or are you including benefits your received from your credit cards I understood the latter was not taxable?
Affiliate income.
If the points / signup bonuses were taxed, that would appear on the 1040 (personal taxes) not the Schedule C (business taxes.) There are some cases of points being taxed when they come from personal referrals rather than spending, which the IRS classifies as a rebate. In that case, the bank issues a 1099.
It is crazy how much you make from Personal Capital. I will try to sign up (Haven’t had luck with other programs due to low traffic…). But isn’t it a bit risky to get such a high portion of the revenue from one source? Btw, I’ve never noticed you pushing it hard to us readers, so… kudos
No more risky than having all revenue come from a single employer aka a job. That this blog earns an income at all is basically an accident anyway.
I know… I guess I assumed the credit cards or even Amazon would be much more important revenue-wise. Anyway I was thinking about trying it, I used Mint years ago but got out because it was too hard to tag movements the way I wanted to.
It would be cool if credit cards and Amazon provided more revenue. Maybe I’ll work on that if I ever get some free time.
Wow, that’s some great blog income! Impressive! Thanks for sharing! It’s really great your this transparent!
Enjoyed the breakdown, as usual great stuff.
Do wonder about personal capital – I use it and enjoy it but their ad spending on your site and youtube ads, etc. makes me think they’re blowing their bucks fast. Reminds me of all the uber and lyft promos for new drivers. Good for all the folks who take advantage but not very sustainable.
Enjoy Paris – a wonderful city.
As always, thanks for sharing! This is amazingly helpful as I contemplate the world of blogging.
Thanks for sharing. Can you explain/breakdown why you chose to fund the Roth 401k and Roth IRA’s instead of making deductible contributions. Thanks.
My effective income tax rate is 0%. If I made deductible / Traditional contributions, I would save nothing now but be subject to tax on the gains/distributions in the future.
Just finished reading your Form 1040. 1. From where and how the Line 44 $1623 come ?
2. Your total tax was $3966 and total payments was $4764 , you received $798 return. Your tax was $3966 for this year?
1. Qualified Dividends and Capital Gain Tax worksheet. 3rd form shown.
2. See Line 56 and Line 57.
https://gocurrycracker.com/go-curry-cracker-2016-taxes/
Is it possible to have a main post, and a guest post in the comments? :) Now guest commenting today…
Comments randomly get disabled on posts older than 25 days, so sometimes people comment on the latest post. I haven’t had a chance to debug it, so just have to reenable them from time to time.
Well, that’s one way to do it, but hardly the best way. If you incorporate as an s corp you can save maybe half on the self employment taxes (maybe more) and get the home office off your personal tax return. No more pesky 1099s since they aren’t filed on corporations. Further you crash your chance of an audit by 90%. Get a Nolo Press book on how to incorporate and do it yourself for only a few bucks. Since you’re living outside of the US, you prob can incorporate in one of the best states, with asset protection and cheap filing fees. You may be pretty clever on the personal income tax minimization, but you’re way behind on biz taxes.
Good luck.
Wow, that sounds fascinating. Please, continue.
This info is easy to find on the interwebs. The s Corp allows you to split your income between w2 income and a dividend. The dividend has no self employment tax.
Look for a article that shows the cost for incorporating by state. Wy, or, nv, de, I think there’s no annual filing on az, bit not sure.
Right. Using the numbers from above, would you mind detailing how much could be saved?
Will this impact my solo 401k contributions? How about future use of the FEIE? Will we have to pay payroll taxes on Jr’s future blog employment? Can I still hire Winnie and get tax free healthcare for the family through an HRA? Will I have to pay State fees of any kind? Can I still use TurboTax to file the Form 1120S, or will that involve additional expense?
WARNING: I AM NEITHER AN ACCOUNTANT NOR A TAX ATTORNEY. GET PROF ADVICE.
Nothing wrong with a sole proprietorship if 1. little liability risk, 2. not making much money. When you start to be a real biz or you have the possibility of litigation, you need a corporation or llc.
With that said:
Solo 401ks are for any business type if the owners (and spouses) have no full time employees. The solo 401k for sole proprietors came into the tax law in 2002 (I think) well after it was available to corporations.
My weak understanding is that the foreign income tax exclusion is for income earned outside the US no matter if it’s from a foreign corp or a US corp. Where you were when you earned the money is the key. Read the IRS pub on it.
About Jr., if you hire him in a corp, you have to pay payroll taxes for him. But you can have him as a contractor and if he earns less than $600, you don’t need to 1099 him.
You can still get the HRA. See this link by Mark Kohler:
http://markjkohler.com/how-and-hra-can-save-you-thousands-with-your-extra-health-care-costs/
Most states have an annual fee along with an information return to keep your biz in good standing–somewhere between maybe $50 and $800 (California is the outrageous $800, don’t EVER incorporate there!!!). Pick a state with no corp income tax and/or low filing fees. NV and WY are popular choices. See this link, for example: http://grasshopper.com/blog/a-concise-guide-to-the-7-best-states-for-incorporating/
WARNING: IF YOU ARE LIVING IN THE US, YOU MUST AT LEAST REGISTER YOUR BIZ, IF NOT INCORPORATE IT, IN THE STATE(S) WHERE YOU LIVE AND DO BUSINESS. Since you’re not living in the US, I don’t think it matters. Get advice.
Turbotaxt for small biz is for s corps too, i think. You’re the one with the program. See what it says. It’s not hard to fill out the form by hand, though, which is what I do every year. But my situation is extremely simple.
Look at these vids by Mark Kohler about S corps:
http://markjkohler.com/why-an-s-corporation-may-be-a-good-move-in-2015/
http://markjkohler.com/maintaning-scorporation/
In your case, figure out the per hour wage for a blogger/webmaster if you hired one. Say $35/hr. Say you work on GGC 8 hr per week on average, 50 weeks per year. That’s $14,000 in salary. The other $14,000 on your return will be “dividend”–that’s really slang, it’s not a dividend but profit that flows through to your 1040. It’s ordinary income with the same income tax as the w2 income. But you will not have to pay the self employment tax on it, saving $2,142.
These are made up numbers. You need to figure this out yourself. Clearly, the more you earn and the less you actually work, the more self employment income you save.
The IRS will get cranky if you take a lot in “dividend.” But Mark Kohler has shown examples with a 25/75% salary “dividend” split.
DID I MENTION THAT I’M NEITHER AN ACCOUNTANT NOR A TAX ATTORNEY???
Wait a minute! with the foreign income tax exclusion, isn’t your GGC income excluded from the 1040???
Yes, that is an option. But it is not the best one, much like how an S-corp is not universally the best choice.
Were we to claim the FEIE, we would not be able to contribute any funds to a solo Roth 401k or Roth IRAs. We would also be ineligible for the CTC, which we currently use to offset taxes on our Roth IRA conversion. We get zero income taxes today either way, but fewer life time taxes without it. This will change as income increases.
Were I to do as you suggest and pay myself $14k per year through an S-corp, I would also be limited to $14k contribution to my solo 401k. It would save some SE taxes now but come with additional costs. Per my accountant friends who aren’t way behind on biz taxes, those costs exceed the gains until we double in revenue +/-. But as income grows and we start using the FEIE our tax burden would be higher with an S-corp.
Since Jr’s role in GCC will grow over time, so will his earnings. An S-corp would require we pay payroll taxes on his income.
The answer to the question about the HRA with an s-corp is no. Same for the Turbotax Q.
About the 401k, nope. You can put in your whole $14,000 from you, and then your s corp can match at 25% of your salary, $3,500 in profit sharing for a total of $17,500.
And who said you have to limit yourself to $14k? that was an example. Get a spreadsheet out and optimize it. Better yet, earn more income. ;-)
See this video from Mark Kohler about hiring children. Your s corp hires their sole proprietorship and it’s called outside labor.
https://youtu.be/vKql_eMl5yg?t=900
To use the HRA, you have an s corp and your wife has a sole proprietorship that does work for your s corp. As a sole proprietor, she can have the hra for the family.
https://www.youtube.com/watch?v=PGQLhLa5HP4&index=30&list=PLZPD0F2WWU7lQDf_PktWvLTddB4g_17FX
Your accountant friends, are they in larger corporations? They are not creative enough.
Do you think Mark Kohler would approve of making a $3,500 profit sharing contribution to the solo 401k? Why trade the 0% tax rate of today for a unknown (but higher) future tax rate?
“It would save some SE taxes now but come with additional costs. Per my accountant friends who aren’t way behind on biz taxes, those costs exceed the gains until we double in revenue +/-.”
What costs???? The cost to incorporate an s corp is trivial using Nolo Press. The taxes aren’t substantially different from what you did above, so you can do them yourself. It costs $100 for the state filing of your new s corp in, for example, WY and $50 a year after that. You’ll need a registered agent–someone who lives in state to receive process if you’re sued–for $100 a year, or ZERO if you have a friend or family member who’ll be your registered agent. This is not breaking the bank, requiring another $30k income. It’s very inexpensive–$150/year!
And you’re not trying to tell me that TurboTax doesn’t have software for s corps, the most common biz entity in the US, are you????????????????
https://ttlc.intuit.com/questions/2589801-can-i-file-my-business-taxes-s-corp-using-turbotax-business
I’ve been posting these comments not for you, but because your readers seemed to think your “strategy” is some how special. It’s not. It’s mundane. Every cpa worth his salt knows there are only three ways to beat the income tax game:
1. have a small business,
2. own income property,
3. shift your income away from ordinary income to passive income.
The strategies that you FI people propound are not new and not revolutionary. They are in the tax code. I’ve been doing them all off and on for 35 years, depending on our family situation, and they weren’t new then, either.
Don’t get me wrong. It’s great that you are showing others these strategies. But let’s go to the right sources for small business and investment advice, please.
Your readers need to know that there are other ways to skin this cat, especially if they start businesses where they would have liability, or if they are high paid consultants. Being a sole proprietor can be a VERY costly mistake.
Have you ever considered starting your own blog? Someone with your passion and vigor would probably do well with it. And with your experience, unique perspective, and access to numerous links, you would certainly be able to help/save more people than is possible through the comments section of a mundane website.
PS And of course an off shore company would be even better for you.
Hi Jeremy, been reading the blog for some time, great work. Thanks for sharing this. I got lost on the Commissions and Fees part. Did I understand correctly that this is Adsense fees paid to put a banner on Winnie’s blog to bring traffic to your site? if so, shouldn’t this be shown on the advertising line?
true story: it doesn’t really matter what line you put it on.
However, this is just a nuance due to Google denying a separate Adsense account for Winnie. So we put an ad unit on her site that pays me, and I pay her whatever Google pays me.
Another fantastic post on taxes. Thanks so much for sharing so much of your personal info.
Bookmarked for a future in which my blog makes more than the princely sum of $2 a month. A girl can dream.
$2/month is a good start. GCC made zero for nearly 2 years.
I like how you paid jr 300 for modeling. He can now officially say that he is a professional model. Great idea to start a Roth IRA. Interested in why you stop at $300? Just wondering if it’s something that might get the attention of the IRS or if it’s more of a budget restriction?
$300 was just an easy number to work with, where I don’t have to provide a W2 or a 1099. There are no limitations beyond paying a reasonable wage.
I volunteered with the United Way and did free tax preparation this season, in all I probably did about 200 returns.
Only one, yes ONE, of my ride sharing clients knew anything about a mileage deduction or had an estimate. Several even didn’t know how to find the report that was sent from their ride sharing company (not that those reported miles are all you can deduct but at least it’s a start).
I had some very rewarding moments and figure I saved people at least $50K in tax prep fees and maybe $30K in taxes. Preparing Sch C’s were some of the most interesting because each case can be different. Nobody knew taxes could be so complicated!
This sounds awesome. Working through a bunch of Schedule Cs would be a lot of fun, to see profit margins for different business types.
Wait, how did you get $300 from Betterment? Maybe a payment to NOT write another review? ;)
I know, right? I think I need to come up with better titles.
I am a bit surprised you made so much money off of Personal Capital. I was under the impression they didn’t pay commissions unless an account had 100,000 of assets in it. Is it possible you made that much off of people with 100k in assets signing up?
I am new to this blogging thing so I am not 100% familiar. Before your blog created an income, did you deduct expenses on schedule C as a loss against your other income? I am hoping to make some more income soon so my losses this year don’t look suspicious to the IRS. Then again, my expenses aren’t sky high yet with my blog either.
Thanks for sharing.
I’m not really sure how the PC affiliate program works. I think what you are saying is correct.
I didn’t start blogging until after I quit my day job, and never considered taking a loss the first couple years. The dollar amounts were so low that I didn’t even think about it. Early costs were only a few bucks per month for hosting.
Great post GCC. What an inspiration for bloggers like me! I love how you itemize all expenses, down to a $2 tape. You must be a master at keeping paper records, not that IRS will ask for a receipt for the $2, but who knows, they might. I have used my son as a ‘hand model’ in my blog but haven’t paid him yet. Perhaps I will when my blog starts making serious money. My blog made a grand total of $120 for all of last year, but then to be fair, I only started the blog in July 2016. Most of that was consumed by hosting and domain costs. Let’s see how this year shapes up.
How did you deduct the health insurance premium? Does it apply only for self-employed bloggers, what about for those in a full-time job covered insurance but who do blogging on the side and want extra coverage?
I want to find out how the deduction on health insurance premium works too!
GCC, are you planning a post on the impacts or the proposed tax code changes? I am sure it risks devolving into a political battle, but maybe a factual take? There are some major changes on the table.
If/when it appears they will become law.
I just started my blog last month, looking forward to an eventual income, but kind of looking forward to filing taxes this coming year! Does that make me a little sick? I won’t have too many expenses associated with starting the blog, but being able to create a home office and write off some of those expenses will be nice. You, MMM, and JLCollins have been my inspiration. Keep the posts coming, always looking forward to more!
Hi GCC, since you guys have lived in many different countries, what kind of visas did you get for the different countries?
Just tourist visas. In most cases, just visa on arrival
Hi GCC, I always like your posts and seeing how you achieved FI … and your lifestyle of doing what you like when your family decides to do things …. I am glad you have decided to blog for a few years to chronicle your adventures for the benefit of others’ financial education/reflection process … I also have been following a bit of your community of FI bloggers which is cool too…. the business(tax?) side of your blog etc …. seems to have given you the bonus of multiple side-streams of income ….. this is quite an exciting aspect of your lifestyle (the travel bit is nice too…) …. and perhaps highlights the truth that FI doesn’t mean hanging up your work life in the closet … but rather it gives you the freedom to do whatever work you like … and when you like …. so if you like the solitude and freedom of a blogger/writer’s life … it is possible, if you wish to teach English (ESL) and meet students across the world … it is possible …. or be lifeguard at hotels across the planet … that is possible too … or yack with customers all day at Walmart or Starbucks … you can do that too if you want … or even start a business just for the challenge and fun of it … FI buys you the freedom …. to choose … have more choices … which means more variety too … the extra work moreover gives you more insulation against any bumps in the road after FI … or maybe just a few more options to splurge on like travel or buy a Frappuccino ?! :) … heck you could even work for free helping out as a volunteer at World Vision, OMF, or New Tribes Missions etc etc etc doing humanitarian work or saving the world?! :) … the great thing with FI … is the choices are yours … :) God Bless, … almost semi-retired … Beijing, China :)
Do you pay taxes in your country(s) of residence?
It depends on the country and if you are really a resident or just a visitor.
https://gocurrycracker.com/never-pay-taxes-by-moving-abroad/
I am curious about your dividends and capital gains income streams. I understand that you are actually converting more and more out of the dividend income stream because you have less control over the amounts and the timing of the distributions and based on your previous post on the subject, you converted those stocks into mutual funds of various types. In terms of your capital gains income stream, are these primarily via mutual fund capital gains redistributions or individual stock sales that you made? And are you making these sales to help cover your living expenses or are you selling for re-investment reasons? If you are getting quite a bit as capital gains redistributions, are you able to predict how much your mutual funds will pay out yearly? I have a few mutual funds and the redistribution amounts have a huge variance for me year to year.
Thanks for any feedback.
Capital gains are primarily from Capital Gain Harvesting of ETFs.
Most distributions are unknown until mid-December, so I do most harvesting just before year end.
Thanks for taking the time to reply. I might have missed this, but do you sometimes need to tap into your investments (via capital gains or non-DRIP dividends) to help cover any living expenses? Or are you able to live on only your earned income?
Earned income has never covered our cost of living in ER. I can’t recall fully, but I have pulled a bit of principle out twice afair. I think details are in the annual Spending reports