Personal Investments • Asset Location analysis

You are double-counting the foreign tax credit. An investment in IDEV will underperform its stock holdings by 0.54% in a taxable account, and 0.21% in a tax-sheltered account. An investment in VTI will underperform by 0.22% in a taxable account, and 0% in a tax-sheltered account. The differences are 0.33% and 0.22%, so VTI loses less if placed in a taxable account.

I may be misunderstanding the FTC and realize you are quite knowledgeable on it; IDEV's listed SEC yield is 2.38%, which I understand does not include foreign tax withholding; this dividend is 84% qualified based on the 2024 Ishares summary. In your assumption you give an 8% foreign tax rate which seems reasonable.

With 20% QDI and 27% ODI rates, looking at the SEC yield alone, this gives us:
-Qualified: 84% of 2.38% * 20% = 0.4% (rounded)
-Ordinary: 16% of 2.38% * 27% = 0.084% (rounded)

So we have a tax cost of 0.484%, which is basically what you listed. If we instead are paying taxes on the dividend including the withheld 8% of the dividend (108% of 2.38% is 2.57%), we get:
-Qualified: 84% of 2.57% * 20% = 0.43% (rounded)
-Ordinary: 16% of 2.57% * 27% = 0.09% (rounded)

Which gets us to 0.54%. The FTC then would reduce that back down to the original 0.484%?

This isn't how I was calculating the FTC, but I accept I'm probably wrong. This is of particular interest to me as I am considering adding an international SCV fund to my taxable holdings but am concerned about the tax cost.

Is it fair to assume this also holds true for the Avantis International Small-Cap Value ETF (AVDV)?

AVDV definitely has lower QDI% than DISV. I have in my spreadsheet that AVDV is 68% qualified and has a 7.6% foreign tax, and that DISV is 100% qualified and has a foreign tax of 11.8%. I'd recommend double checking those numbers though. I know DFA focuses much more on tax management than Avantis.

Malus is a new word for me. Thank you. Out of curiosity, are you a lawyer or ?

I'm an academic physician who took way too much Latin throughout my schooling. Gotta use it somewhere, even if only on internet forums

Statistics: Posted by breakfastinbed — Wed Nov 19, 2025 11:28 pm — Replies 28 — Views 1868

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