Investors might face higher taxes on dividends next year

By: Tax Advisors Tax Planning 1 Follower


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If the tax cuts are allowed to expire at the end of the year, stock dividends will be subject to a much higher tax.

Right now, the tax on stock dividends typically is a maximum 15%. But if the Bush tax cuts expire and we revert to previous levels, dividends would be subject to an income-tax rate of as much as 39.6%. For instance, if the cuts were to expire, a married couple filing jointly with $100,000 in taxable income would be in the 28% tax bracket - the rate prior to the tax cuts - and would be subject to that rate on dividends.

There is talk that the tax cuts may only be extended for families earning less than $250,000 a year, or individuals earning less than $200,000. If that happens, then those earning more than that amount might be subject to a higher dividend tax.

If you would like details on provisions that affect you, please contact Tax Advisors.

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