In 2003, former President Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act. One major provision of this law was to reduce the tax rates on certain dividends from nearly 40% for the highest income earners down to 15%. The dividend tax rate for the lowest tax brackets even reached as low as 0%! For us income investors, this tax break was a welcome sight. But the cuts were passed with the provision that they expire at the end of 2010. With the nation… Read More
In 2003, former President Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act. One major provision of this law was to reduce the tax rates on certain dividends from nearly 40% for the highest income earners down to 15%. The dividend tax rate for the lowest tax brackets even reached as low as 0%! For us income investors, this tax break was a welcome sight. But the cuts were passed with the provision that they expire at the end of 2010. With the nation heavily in debt and having run large deficits for the past several years, it’s a foregone conclusion among the investment community that these dividend tax rates will have to rise. Just to be clear, I’m not taking sides. I’m simply trying to prepare you for what could lie ahead. President Obama has proposed only increasing the dividend tax rate to 20% for families making over $250,000. However, the recent healthcare package already tacks a 3.8% tax on investment income for this group starting in 2013. In other words, the highest earners… Read More