Live off dividends — required portfolio, taxed honestly
Set what you want to spend after tax each month; this solves back through the actual 2026 engine — qualified dividends stacked into the 0/15/20% LTCG brackets, non-qualified through ordinary brackets, NIIT 3.8% lesser-of, state tax, and fee drag — for the portfolio you would need, always as a range.
Set your target spending and portfolio yield to solve for the required portfolio.
Required portfolio band
low · typical · high — illustrativeMarks are the low / typical / high required portfolio from an illustrative ±15% yield-scenario spread — a planning band, not measured percentiles. The shaded band spans from the naive spend÷yield answer up to the honest typical estimate: that width is the tax-and-fee reality gap.
Tax-drag waterfall
gross → qualified → ordinary → NIIT → state → fees → netAt the typical required portfolio. Qualified dividends fill the 0/15/20% LTCG brackets stacked above ordinary income; non-qualified dividends run through ordinary brackets; NIIT applies its 3.8% lesser-of rule; state is a flat approximation.
Dividend-cut stress
−30% income overlayApplies a −30% cut to portfolio income at the typical required portfolio — deliberately harsher than the realized 2008–10 index cut (~−24%). Concentrated high-yield portfolios historically cut deeper than the index.
Real purchasing power
dividend growth vs inflationThe flat line is your constant-real spending target; the curve is projected real income if dividends grow at your rate while prices rise with inflation.
Show the math ›
Assumptions & sources ›
| Assumption | Value | Source · asOf |
|---|---|---|
| Ordinary brackets & standard deduction | 2026, single / MFJ | IRS Rev. Proc. 2025-32 (OBBBA-amended) · asOf 2025-10 |
| Qualified-dividend / LTCG brackets | 0% / 15% / 20% | IRS Rev. Proc. 2025-32 §2.03; qualified treatment per IRC §1(h)(11) · asOf 2025-10 |
| NIIT | 3.8% lesser-of, $200k/$250k MAGI | IRC §1411 (statutory, not indexed) · asOf 2025-10 |
| S&P 500 yield anchor | ~1.1% trailing | multpl (1.05% current), cross-checked GuruFocus 1.079% (2026-06-30) · asOf 2026-07 |
| Dividend growth default | 5%/yr nominal | multpl — S&P 500 DPS growth by year, long-run average · asOf 2026-06 |
| Inflation default | 2.7%/yr | BLS CPI-U, Dec/Dec 2025 · asOf 2026-01 |
| Dividend-cut stress | −30% (preset) | 2008–10 realized index cut ~−24% (multpl DPS series); preset deliberately harsher · asOf 2026-06 |
| Yield-scenario band | ±15% of typed yield — illustrative | editorial planning band, NOT measured percentiles; exists so the output is never a single point |
| State tax | flat rate, user input | approximation — state bracket engines are out of scope in v1; principal is never modeled as spent (income-only plan) |
The engine attributes to dividends only the incremental tax they generate on top of your other income (the Qualified Dividends and Capital Gain Tax Worksheet stacking). MAGI is approximated as other income + dividends. Local/city taxes, itemized deductions, credits, and foreign withholding are not modeled — all figures are estimates for planning illustration.
The 4% yield trap
honest caveatTyping a 4% yield makes the required portfolio look pleasantly small — but the broad US market yields roughly 1.1% (multpl, asOf 2026-07), near its all-time low. Getting to 4% today means concentrating into high-yield sectors: REITs, BDCs, MLPs, covered-call funds, telecoms, tobacco. That trade is not free income. It typically swaps growth and resilience for cash now: high-yield portfolios historically grow distributions more slowly, cut them harder in recessions (the 2008–10 index cut was ~−24%; many yield-chasing holdings cut far deeper), and shift more of the payout into non-qualified income taxed at ordinary rates.
This page will happily solve for any yield you type — that is the point of the yield-reality chip, the qualified-share input, and the −30% stress toggle. If the plan only works at 4% yield with zero cuts, the projection is telling you the plan is fragile, not that the portfolio is small. An alternative framing for the same spending target is total-return withdrawal — see the safe withdrawal rate page.
Common questions
How much money do I need to live off dividends? ›
It depends on your after-tax spending target and portfolio yield. This calculator takes the monthly amount you want to spend after tax and solves backward through the 2026 tax engine and fee drag for the portfolio that delivers it. Because a naive spending-divided-by-yield figure ignores taxes and fees, the honest number is shown as a range, and the gap between the two is the tax-and-fee reality.
Why is the S&P 500 dividend yield so low? ›
The broad US market yields roughly 1.1 percent (multpl, as of 2026-07), a historically low level, so this calculator uses it as a reality anchor. Reaching a 4 percent yield today means concentrating into high-yield sectors such as REITs, BDCs, MLPs, covered-call funds, telecoms, and tobacco. That tilt has historically grown distributions more slowly, cut them harder in downturns, and shifted more payout into non-qualified income taxed at ordinary rates.
How are dividends taxed when you live off them? ›
The engine stacks qualified dividends into the 0/15/20 percent long-term capital gains brackets above your other income, runs non-qualified dividends through the ordinary brackets, applies the 3.8 percent net investment income tax under its lesser-of rule, and adds a flat state approximation plus fee drag. It attributes only the incremental tax the dividends generate on top of other income, following the Qualified Dividends and Capital Gain Tax Worksheet stacking.
What happens to dividend income in a market downturn? ›
The page includes a dividend-cut stress that reduces portfolio income by 30 percent, deliberately harsher than the roughly 24 percent peak-to-trough cut the S&P 500 saw across 2008 to 2010. It reports net income after the cut, how much of your spending target that still covers, and the larger portfolio sized to survive it. Concentrated high-yield portfolios have historically cut deeper than the index.
Related
- Safe withdrawal rate
The total-return alternative to an income-only plan.
- Dividend snowball
Growing the dividend stream on the way up, taxed with the same engine.
- Methodology
How the tax engine, anchors, and scenario bands are built.