<prompt> Human: I have a not insignificant sum of money in a taxable brokerage account with Vanguard, as well as a much smaller traditional IRA with Vanguard. I only opened the IRA this year because I recently got my first adult job and, up until this year, I havent qualified to make any contributions to one until now.For my own convenience Ive set it up so that all of my dividends from my taxable account go into a sweep account as opposed to being reinvested, which they were before, which I then have been transfering into my IRA until I hit my contribution cap for my year. To me it seemed like a sensible thing to do with the dividends. However, a friend told me this is a terrible idea akin to throwing away money to taxes because my traditional IRA contributions are tax deductible, but my dividends are taxed as long term capital gains and not income. He said Id be better off transfering the dividends straight to my bank account and contributing to my IRA from the the income I get paid by my employer. This blew my mind because to me all of money is just numbers and I havent realized that there could even be a distinction between which dollars I got from which income sources.Is my friend right? It seems I dont quite have a grasp on this whole what even is money thing.  <response>: Your friend is wrong. Money is fungible, the source does not matter. You will be taxed on long term capital gains and dividends, and then you can deduct the entire contribution from your income. in most cases. For example, contributing to an HSA will save you more when the source is a payroll contribution rather than from your bank account, as then you wont have to pay FICA taxes. But in your situation, theres no difference. 