Do you treat dividends as income or not?

Investing / Others
1

Many of us on this forum track not only their net worth, but also their income and expenses. So do I.

But I have been wondering about how to treat dividends and option premiums in my personal accounts. So far, I have simply updated the size of my ETF / option portfolio each month and recorded the difference as ‘capital gain / capital loss’, ignoring any dividends paid that month.

However, this results in an under-reporting of income and gives a false picture when comparing income with tax paid (as I pay tax on dividends, but do not record them as income).

Now, it would be relatively easy for me to treat the dividends as income and the rest of the fluctuation as capital gains/losses. But then, what about the ‘supposed’ dividends from accumulating ETFs? Treat them like dividends? But based on which values (Swiss tax authorities have not yet provided 2023 figures for many funds)?

How do you treat dividends / taxable earnings from accumulating funds and option premiums in your personal accounts?

2

I treat dividends as total returns and my accountant just records dividends as appropriate (income) in the tax form.

Eh, this is not the reason I switched from accumulating to distributing ETFs, but given you want to be absolutely accurate in your own book keeping it may make sense to have distributing ETFs. I don’t know how the tax agency deals with underreported numbers for accumulating funds.

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3

Adjacent question. Do dividends from equities, ETFs or your own business counts as income when it comes to banks evaluating affordability for a mortgage ?

4

Thanks! Of course, I report all taxable income (from dividends and accumulating funds) in my tax return. But this is done many months after closing the accounts for the year.

5

I track “income from work” and “income from dividends/interest” as separate things.

Great question and I wonder the same thing. Maybe @Cortana knows?

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6

I don’t count dividends, they’re only used to buy new shares for my ETFs, so I don’t consider them as income that would allow me to live or buy goods or services. The only income I count is my own and the one from my partner. Gifts or monetary donations are considered as gifts/donations, and not as income either.

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7

All actual cash flow coming in that I can spend as I want to is income in my book.

I don’t care if it’s dividends, coupons, interest from securities lent out, option premiums, fancy accounting “capital gains” paid out (happens e.g. in REITs). It’s money I can spend freely myself.

Tax wise it’s not all income, of course.

8

Jus to be clear, I didn’t imply you didn’t report correctly (apologies if it sounded like that), just that the funds underreport and/or ICTax doesn’t have up to date numbers.

9

Great definition. So dividends from distributing ETF are income, pseudo distributions from accumulating funds are not. I can work with that.

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