🚨UPDATE!🚨 Are you considering investing in MLPs for 2020 and beyond? Check out this video for some thoughts on how to do it: ruclips.net/video/r2yZAy8Ih34/видео.html
Amazing explanation. I have been reading on the topic, and this is the most clear explanation. You have a gift for clarity. Taxes are only going to go up from now on, so having these MLPs that pay 7-10% dividends, tax-deferred the taxes make sense and just hold them forever. In worse case scenario, when cost basis goes to 0, you just pay capital gains.
Thanks for the info! I'm thinking of getting in to MLPs...I would love to see a video covering some analysis of popular MLPs, such as ENB, MMP, EPD, PBA - That have long dividend payout and dividend growth streaks - with scenarios of holding for 5, 10, 15+ years.
Also, I am learning about investing, but very few channels explain the tax implications of investments. From a couple of videos that I saw on you, you cover this very well, congratulations! . I think this is a very important aspect, specially with the huge debt crisis that the world has, and taxes have to go up. One topic that might be of interest in the future is closed-end-funds of munis, there are some that pay 4-5% tax free (with current interest rates of munis of 1% at 5-10 years), that seems too good to be true given the ~30% leverage that they have. There must be a trick, but I cannot figure out : ).
Thank you, I’ve slowly realized how important the impact of taxes can be on overall returns! That’s a great suggestion - I’ve got a video coming out on closed end funds soon. May take a deeper dive to look into muni CEFs. 🙂
To ftorre211 or to Tyler McMurray, at what point is owning an MLP worth it with regard to taxes? From the sounds of it, it is recommended to have someone else do taxes due to the complexities that come with MLPs when it's tax time. Is there a dollar amount or some other quantitative or qualitative measure? TIA.
Great job Tyler in your explanation. The "Tax Cuts and Jobs Act" changes in the IRS tax code also make the pass-through entities eligible for the "Qualified Business Income" deduction - which may be beneficial, but it depends. Then there are also the passive activity loss rules to consider which limit the ability to take passthrough losses as a deduction on your tax return via offset against other non-passive sources of income. So yes, anyone who invests in these K-1 generating pass-through entities should certainly be seeking out the guidance of a qualified tax professional.
Thanks for all your recent comments! I’m glad my interpretation of these complex tax scenarios holds up with a professional. 😂 but like you said, better safe than sorry when dealing with these kind of investments at tax time! I’m happy to pay my CPA to sort through this stuff so I don’t have to stress about it.
Video on ET! I've had them for almost 3 years now. I'm up over double my average cost and the dividend has been steadily going up. I've reinvested every dollar. Do you think it's a bad MLP to be in?
...Also - comparing 1) owning individual shares of MLPs and their tax liabilities (which you already mentioned) - to 2) owning the AMLP (or other MLP ETFs), and not having as much tax work - but being taxed at a higher rate
Thanks for the comments, Matt! Love the idea of looking into individual MLPs vs. ETFs - I have the same long-term outlook, so I've had some of the same thoughts! I'll take a closer look at the MLPs you mentioned and discuss them with some of my favorites in an upcoming video. Stay tuned! 😃
Had to read In re El Paso Pipeline Partners, L.P. Derivative Litigation - 2014 WL 2768782 (2014) - for class and this really helped me understand what was going on
Great video! as a foreigner investor that means i get the full dividend, no taxes ? Because as far as i know the only tax i pay in the USA is the automatic 30% on the dividends
Thanks Omar! Unfortunately I don’t know how these work for international investors. I can’t speak on the tax effects for anyone who is a non-U.S. resident. 🤷🏼♂️
Good morning Omar , How do you solve K-1 fill or 1065 when u investing to american LP as non us resident ? I have to sold all my shares of LP when i found out I must fill this form.
I don't fully understand the situation myself - to my knowledge, the distributions from MLPs are NOT tax-free like most other dividends in a Roth IRA. So unless you really like the MLP in question, this kind of defeats the purpose of holding it in the Roth IRA. I think it also requires extra action on our end, which may necessitate hiring a tax professional.
@@The-Bitcoin-Revolution oh okay, I see. I never really thought of MLPs being different than regular dividends and they totally are! Thank you for the video :)
Wouldn’t your cost basis go up if you buy more units of the MLP? I’d think it’s theoretically possible to prevent the cost basis from ever hitting zero if you periodically buy more units. Great explanation!
Yes, but you'd have to buy more units at a rate exceeding the dividend distribution rate while the units appreciate. Remember, the 'dividends' you're receiving are a return of capital so you'd have to not only purchase more units of the MLP but the cost would have to be higher in addition to the velocity at which you're buying. Your new unit amount purchased would have to exceed your yield. So if you own an MLP with a 12% yield but purchased an additional 13%+ of the amount initially invested then it is possible to raise the cost basis. Also consider the amount of units retained compounds the return of capital you receive after each distribution thereby reducing cost basis greater than the previous distributions. And even if you're purchasing more units at a higher cost basis it's all inconsequential until you sell the units to pay tax. I'm no tax expert but I'm thinking of it as the difference between realized and unrealized losses. A higher cost basis doesn't hurt you because the focus of owning an MLP, for me at least, is to acquire units tax free instead of taxable capital gains or income. This structure enables an investor to make money without relying on the share appreciating.
🚨UPDATE!🚨
Are you considering investing in MLPs for 2020 and beyond? Check out this video for some thoughts on how to do it: ruclips.net/video/r2yZAy8Ih34/видео.html
Amazing explanation. I have been reading on the topic, and this is the most clear explanation. You have a gift for clarity. Taxes are only going to go up from now on, so having these MLPs that pay 7-10% dividends, tax-deferred the taxes make sense and just hold them forever. In worse case scenario, when cost basis goes to 0, you just pay capital gains.
Thank you so much for the comment 😁 that’s exactly my thought process! Finding one that you can hold for a lifetime is worth the search!
How much are capital gains taxes?
Thanks for the info! I'm thinking of getting in to MLPs...I would love to see a video covering some analysis of popular MLPs, such as ENB, MMP, EPD, PBA - That have long dividend payout and dividend growth streaks - with scenarios of holding for 5, 10, 15+ years.
Hey Matt! I published a video on this today. Check it out here: ruclips.net/video/r2yZAy8Ih34/видео.html
Also, I am learning about investing, but very few channels explain the tax implications of investments. From a couple of videos that I saw on you, you cover this very well, congratulations! . I think this is a very important aspect, specially with the huge debt crisis that the world has, and taxes have to go up. One topic that might be of interest in the future is closed-end-funds of munis, there are some that pay 4-5% tax free (with current interest rates of munis of 1% at 5-10 years), that seems too good to be true given the ~30% leverage that they have. There must be a trick, but I cannot figure out : ).
Thank you, I’ve slowly realized how important the impact of taxes can be on overall returns! That’s a great suggestion - I’ve got a video coming out on closed end funds soon. May take a deeper dive to look into muni CEFs. 🙂
To ftorre211 or to Tyler McMurray, at what point is owning an MLP worth it with regard to taxes? From the sounds of it, it is recommended to have someone else do taxes due to the complexities that come with MLPs when it's tax time. Is there a dollar amount or some other quantitative or qualitative measure?
TIA.
Great job Tyler in your explanation. The "Tax Cuts and Jobs Act" changes in the IRS tax code also make the pass-through entities eligible for the "Qualified Business Income" deduction - which may be beneficial, but it depends. Then there are also the passive activity loss rules to consider which limit the ability to take passthrough losses as a deduction on your tax return via offset against other non-passive sources of income. So yes, anyone who invests in these K-1 generating pass-through entities should certainly be seeking out the guidance of a qualified tax professional.
Thanks for all your recent comments! I’m glad my interpretation of these complex tax scenarios holds up with a professional. 😂 but like you said, better safe than sorry when dealing with these kind of investments at tax time! I’m happy to pay my CPA to sort through this stuff so I don’t have to stress about it.
I want to invest in IEP but what if they cut their dividends, that wouldn’t be something to hold forever than if you rely on it for income right?
Best explanation of how MLPs are taxed. Thank you so much for the great video and info! 👍
You explained perfectly! Thank you!!!
What's is the minimum initial cost? And does this apply to us Canadians?
Great video Tyler! This really helped clear things up.
Thanks! Happy to help 😃
This is great - you explained very well. Thanks!!
Thanks Peter! 🍻
Video on ET! I've had them for almost 3 years now. I'm up over double my average cost and the dividend has been steadily going up. I've reinvested every dollar. Do you think it's a bad MLP to be in?
No bro et it’s the best I bet ur up triple now
Another very informative video. Strong work.
Thanks so much!
Great content! Very informative.
...Also - comparing 1) owning individual shares of MLPs and their tax liabilities (which you already mentioned) - to 2) owning the AMLP (or other MLP ETFs), and not having as much tax work - but being taxed at a higher rate
Thanks for the comments, Matt! Love the idea of looking into individual MLPs vs. ETFs - I have the same long-term outlook, so I've had some of the same thoughts! I'll take a closer look at the MLPs you mentioned and discuss them with some of my favorites in an upcoming video. Stay tuned! 😃
Had to read In re El Paso Pipeline Partners, L.P. Derivative Litigation - 2014 WL 2768782 (2014) - for class and this really helped me understand what was going on
How are you guys feeling about master limited partnerships? Do you have the patience to hold this type of security for years to come?
I am feeling still very confused about the actual process of completing taxes.
@@miket2916 Tax software helps. Tax Act was OK for me. Maybe a video of filling the 1065 and/or using popular tax software would be good?
What kind of tax forms are required when reporting MLP distributions?
Schedule K-1 IRS Form 1065.
@@antilogism any advice/videos on how to fill those?
@@coolcha
These two helped me:
ruclips.net/video/wvGHQ7NErcs/видео.html
and
ruclips.net/video/HGiXrdml7QI/видео.html
Great content.
Great video! as a foreigner investor that means i get the full dividend, no taxes ?
Because as far as i know the only tax i pay in the USA is the automatic 30% on the dividends
Thanks Omar! Unfortunately I don’t know how these work for international investors. I can’t speak on the tax effects for anyone who is a non-U.S. resident. 🤷🏼♂️
Good morning Omar , How do you solve K-1 fill or 1065 when u investing to american LP as non us resident ? I have to sold all my shares of LP when i found out I must fill this form.
i am currently taxed 37% for all those distributions, as i am a non US investor. Do i have to pay additional tax ?
Sorry Chris, I don't know enough about taxes for non-US investors to weigh in on this. 🙁
Can you please explain the issue with a MLP in a ROTH IRA a little more?
I don't fully understand the situation myself - to my knowledge, the distributions from MLPs are NOT tax-free like most other dividends in a Roth IRA. So unless you really like the MLP in question, this kind of defeats the purpose of holding it in the Roth IRA. I think it also requires extra action on our end, which may necessitate hiring a tax professional.
@@The-Bitcoin-Revolution oh okay, I see. I never really thought of MLPs being different than regular dividends and they totally are! Thank you for the video :)
My oil and gas MLPs have pumped since you made this video. Go woke - go broke!
Wouldn’t your cost basis go up if you buy more units of the MLP? I’d think it’s theoretically possible to prevent the cost basis from ever hitting zero if you periodically buy more units. Great explanation!
Yes, but you'd have to buy more units at a rate exceeding the dividend distribution rate while the units appreciate. Remember, the 'dividends' you're receiving are a return of capital so you'd have to not only purchase more units of the MLP but the cost would have to be higher in addition to the velocity at which you're buying. Your new unit amount purchased would have to exceed your yield. So if you own an MLP with a 12% yield but purchased an additional 13%+ of the amount initially invested then it is possible to raise the cost basis. Also consider the amount of units retained compounds the return of capital you receive after each distribution thereby reducing cost basis greater than the previous distributions.
And even if you're purchasing more units at a higher cost basis it's all inconsequential until you sell the units to pay tax. I'm no tax expert but I'm thinking of it as the difference between realized and unrealized losses. A higher cost basis doesn't hurt you because the focus of owning an MLP, for me at least, is to acquire units tax free instead of taxable capital gains or income.
This structure enables an investor to make money without relying on the share appreciating.
By the way, you were interested in a fund for cryptocurrency, check out this one: GBTC (the expense ratio is expensive) but might be good for a while.
The background music is distracting and annoying
Can you do a review on crestwood. (CEQP)