Quick Read
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Realty Income (O), Omega Healthcare (OHI), and W. P. Carey (WPC) generate ordinary income taxed at the full marginal rate, making them the biggest beneficiaries of Roth sheltering.
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Altria (MO) and Verizon (VZ) pay qualified dividends taxed at 15%, delivering a real but smaller Roth advantage than the REIT holdings.
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Reinvesting the $2,217 annual tax savings at 4% grows the Roth advantage to roughly $66,000 after 20 years, with REITs accounting for $40,100 of that figure.
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At the 24% bracket, a $200,000 portfolio of six high-yield stocks making about $11,400 a year sends roughly $2,200 of that income to the IRS when it sits in a taxable account. Inside a Roth IRA, the full amount stays with you. For retirees living on portfolio income, that gap shows up every month.
Roth Versus Taxable: A $2,200 Annual Gap
The portfolio splits $200,000 equally across three REITs and three blue-chip dividend payers. The 24% bracket applies to single taxpayers with income over $105,700 ($211,400 for married couples filing jointly) in 2026. REIT dividends are generally taxed as ordinary income at the applicable marginal rate. The 0%, 15%, or 20% capital gains rates apply to qualified dividends, and at this bracket that usually means 15%.
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| Stock |
Yield |
Annual Income |
Tax Treatment |
|---|---|---|---|
| Realty Income( NYSE:O ) |
5.36% |
$1,787 |
Ordinary |
| Omega Healthcare Investors( NYSE:OHI ) |
5.73% |
$1,910 |
Ordinary |
| W. P. Carey( NYSE:WPC ) |
5.76% |
$1,920 |
Ordinary |
| Altria( NYSE:MO ) |
5.5% |
$1,833 |
Qualified |
| Verizon( NYSE:VZ ) |
6.29% |
$2,097 |
Qualified |
| Pfizer( NYSE:PFE ) |
5.58% |
$1,860 |
Qualified |
In the taxable account, gross income of $11,407 takes a $2,217 tax hit, leaving $9,190. Inside the Roth, net income equals gross: $11,407. That puts the Roth advantage at $2,217 per year and $22,165 over 10 years, before any reinvestment.
The REIT half makes $5,617 and owes $1,348. The qualified half makes more income ($5,790) but owes only $869. Roth space saves the most tax on the REIT half. The math uses the full marginal rate. Some taxpayers can lower their effective rate through the Section 199A deduction for qualified REIT dividends.
Why Each Name Fits a Roth
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Realty Income, which pays every month, announced its 116th consecutive quarterly dividend increase in September. Each monthly check is treated as ordinary income for tax purposes.
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Omega Healthcare Investors raised its quarterly payout to $0.68. As a skilled nursing REIT, its distributions are taxed at your full bracket.
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W. P. Carey raised its dividend 4.4% to $0.95 per quarter on a 71% payout ratio. As the highest-yielding REIT here, it has the largest ordinary-income tax bill.
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Altria delivered its 61st dividend increase in 57 years. Its dividends are qualified, so the Roth benefit is lower but still real.
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Verizon has the highest yield in the group. Even at the qualified rate, it makes the biggest single tax bill among the non-REITs.
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Pfizer has paid $0.43 per share for the latest eight records. That regular qualified income works in either account, though the Roth still saves 15%.
All six pay standard 1099-DIV dividends, which keeps them clear of the partnership tax complications that can come up inside an IRA.
Higher Brackets Raise the Cost of Holding These Stocks in a Taxable Account
The table assumes 15% on qualified dividends at the lower brackets and 20% at the top.
| Bracket |
Taxable Net Income |
Roth Net Income |
Annual Roth Advantage |
|---|---|---|---|
| 22% |
$9,303 |
$11,407 |
$2,104 |
| 24% |
$9,190 |
$11,407 |
$2,217 |
| 32% |
$8,741 |
$11,407 |
$2,666 |
| 37% |
$8,171 |
$11,407 |
$3,236 |
Each step up in bracket drives the cost mainly through the REIT portion, because qualified rates stay flat until the top bracket.
How the Gap Compounds Over 20 Years
Suppose the $2,217 annual difference is reinvested tax-free at a conservative 4%, with no change in share prices. The gap grows to about $26,600 after 10 years and $66,000 after 20. The REIT portion alone accounts for roughly $40,100 of that 20-year figure. This is the income you give up by keeping these positions in a taxable account.
Three Steps Before Your Next Tax Filing
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Look at last year's 1099-DIV and compare box 1a with box 1b. The difference shows how much of your dividend income was taxed at your full bracket.
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If O, OHI, or WPC sit in a taxable account, plan a gradual Roth conversion beginning with the REITs, since each converted dollar saves the most tax per year.
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Before Social Security and RMDs drive your bracket higher, check whether converting in a lower-income year costs less than the $66,000 20-year gap.
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