Quick Read
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An $800,000 portfolio split evenly across MAIN, NNN, and ADC generates $45,384 annually, but a taxable account surrenders $10,892 to the IRS each year.
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NNN REIT has raised its dividend for 37 consecutive years, carries a 69% AFFO payout ratio, and maintains 99.1% occupancy.
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Reinvesting the annual tax savings at 4% compounds to $324,343 over 20 years, nearly triple the $108,920 saved without reinvestment.
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Read More: Learn 7 ways to generate income with a $1,000,000+ portfolio (sponsor)
At the 24% federal bracket, an $800,000 portfolio split evenly across three monthly and quarterly payers produces about $45,384 in annual dividends. Held in a taxable account, roughly $10,892 goes to the IRS each year. In 2026, the 24% rate starts at taxable income above $105,700 for single filers and $211,400 for married couples filing jointly.
Why REITs and BDCs Take the Biggest Tax Hit
Payouts from REITs and business development companies are mostly non-qualified dividends, so a regular account taxes them as ordinary income. Under 26 U.S.C. § 1(h)(11)(D)(iii), the tax code limits qualified-dividend treatment for dividends from REITs and regulated investment companies. REIT shareholders can deduct 20% of qualified REIT dividends under 26 U.S.C. § 199A(b)(1)(B). That deduction narrows the gap on the two REITs here, but the gap remains significant. The math below uses the full bracket rate.
A Roth keeps $45,384 a Year. A Taxable Account Keeps $34,492
Each position gets about $266,667. Current share prices and forward annualized dividends set the yields.
| Stock |
Yield |
Gross Income |
Tax at 24% |
Taxable Net |
Roth Net |
|---|---|---|---|---|---|
| Main Street Capital( NYSE:MAIN ) |
6.0% |
$16,000 |
$3,840 |
$12,160 |
$16,000 |
| NNN REIT( NYSE:NNN ) |
6.09% |
$16,241 |
$3,898 |
$12,343 |
$16,241 |
| Agree Realty( NYSE:ADC ) |
4.93% |
$13,143 |
$3,154 |
$9,989 |
$13,143 |
| Total |
$45,384 |
$10,892 |
$34,492 |
$45,384 |
The Roth comes out ahead by about $10,892 a year, or $108,920 over 10 years with no growth assumed.
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Main Street Capital: The yield uses a $3.18 forward regular dividend and a $53 share price. Special payouts brought trailing 12-month dividends to $4.33, so actual income, and actual tax drag, can run above the table. Safety read: Q2 distributable net investment income (DNII) before taxes came in at $1.08 per share. NAV hit a record $33.92, non-accruals were 1.1% of fair value, and leverage stood at 0.69x. Management expects Q3 DNII of at least $0.97 per share.
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NNN REIT: The yield uses a $2.48 annualized dividend and a $40.72 share price. As the highest yielder of the three, it carries the largest tax bill. Safety read: the AFFO payout ratio is 69%, occupancy is 99.1%, and 2026 marks the company's 37th consecutive annual dividend increase.
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Agree Realty: The yield uses a $3.252 forward dividend and a $65.98 share price. The monthly payout just rose to $0.271. Safety read: Q3 payout was approximately 69% of AFFO, occupancy hit a record 99.8%, and the company has no material debt maturities until 2028.
How Much Your Bracket Adds to the Roth Advantage
| Bracket |
Taxable Net |
Roth Net |
The Yearly Roth Advantage |
|---|---|---|---|
| 22% |
$35,400 |
$45,384 |
$9,984 |
| 24% |
$34,492 |
$45,384 |
$10,892 |
| 32% |
$30,861 |
$45,384 |
$14,523 |
| 37% |
$28,592 |
$45,384 |
$16,792 |
A household in the top bracket gives up close to $16,792 a year on these three stocks alone. The higher the bracket, the more each year of holding these stocks costs (the quiet years between your last paycheck and your first RMD are often the cheapest time to move these positions into a Roth, which is the whole subject of our free Roth Window guide).
Compounding Turns $10,892 a Year Into $324,343
Reinvest the annual $10,892 difference at 4%, and it reaches about $130,771 after 10 years, compared with $108,920 without reinvestment. After 20 years, it reaches roughly $324,343, compared with $217,840. These figures leave out dividend increases and price changes. They show what it costs to hold these three positions in a taxable account over time.
Three Steps Before Your Next Tax Filing
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Pull your 1099-DIV for any BDC or REIT held in a taxable account and multiply its ordinary dividends by the rate on your top bracket. Your annual tax cost is that figure.
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Run Roth location math on Main Street Capital and NNN REIT first. They yield the most here, so they gain the most from tax-free location.
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Model a phased conversion over several tax years, set so each year's converted amount keeps you inside your current bracket.
Learn 7 Ways To Generate Income With A $1,000,000+ Portfolio
If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.
Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)
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