Help Maintain the Tax Rate on Dividend Income

FreeUrChains · Post by **FreeUrChains** » Tue Jul 10, 2012 3:19 pm

Since 2003, shareholders have benefited from a tax reduction established by Congress that capped the maximum personal tax on dividend income at 15 percent. That rate is set to expire on Dec. 31, 2012. If Congress doesn’t take action to extend the current tax level, the tax rates for Americans with qualified dividend income will significantly increase. Learn more about the affect on shareholders.
Visit DefendMyDividend.org and click the "Act Now" link to ask your congressional representatives to extend the current dividend tax levels!
Even with incomes of less then $30k, Your tax bracket will not matter for this incoming spike of Tax Hikes on Dividend income! It will affect every social class and almost every ERE that has dividend income investments.

Chad · Post by **Chad** » Tue Jul 10, 2012 3:23 pm

I'm fine with the hike.

jennypenny · Post by **jennypenny** » Tue Jul 10, 2012 5:05 pm

Yeah, I think dividends should be taxed at normal income tax rates. (hey Chad, we agree!)

Chad · Post by **Chad** » Tue Jul 10, 2012 5:32 pm

Wahoo! I knew there was something.

44deagle · Post by **44deagle** » Tue Jul 10, 2012 5:55 pm

Already did this awhile ago.
It's part of the "Bush" tax cuts. If I remember correctly if you make under $34,000 you don't pay taxes on qualified dividends. Saved me a bunch of money last year since a good chunk of my income was from dividends and I was under the income limit.
If this tax is raised it will make it just that much harder to ERE.

GandK · Post by **GandK** » Tue Jul 10, 2012 6:14 pm

My congressman is Boehner. He will vote to extend whether I contact him or not.

Chad · Post by **Chad** » Tue Jul 10, 2012 6:17 pm

Not really. Yes, those in the bottom two tax brackets didn't pay any taxes on dividends (2008-2012), but everyone else only paid 15% on dividends. This is why Buffett has a lower tax rate than his secretary.

44deagle · Post by **44deagle** » Tue Jul 10, 2012 6:41 pm

yeah really, I saved about $2,000 for the year by not paying taxes on dividends. $166 a month will make it harder for people to ERE.

George the original one · Tue Jul 10, 2012 6:56 pm

USA dividend tax rates will effectively not change if your TAXABLE income is <$35.5k for a single person or <$71k as a married couple. In other words, if you have a median income or less, it won't affect you.
For singles, if your TAXABLE income is $35.5k-$86k, then the tax rate on dividend income above $35.5k will increase to 25% from the current 15%.
For married couples, if your TAXABLE income is $71k-$143.35k, then the tax rate on dividend income above $71k will increase to 25% from the current 15%.
And if your TAXABLE income is above those brackets, most folks are wishing they had your problem.
***
It's worth noting that using standard deductions and personal exemptions, the first $9,750 of income for a single person is not taxed and the first $19,500 of income for married couples is not taxed.

Chad · Post by **Chad** » Tue Jul 10, 2012 6:59 pm

I know. I stated that already. But, that didn't impact anyone higher up. I'll gladly take a hit.

44deagle · Post by **44deagle** » Tue Jul 10, 2012 7:08 pm

George the original - Do you have a source you can link me on the new tax rates starting 2013? A couple articles I just read and wikipedia say dividends will be taxed at ordinary income rate for everyone.
http://en.wikipedia.org/wiki/Dividend_tax

George the original one · Tue Jul 10, 2012 7:36 pm

@44deagle - Yes, those are the oridnary income tax rates that will happen if the Bush tax cuts are allowed to expire OR if Obama's budget is accepted.
http://www.taxpolicycenter.org/taxtopic ... o-rise.cfm
The tax rate debate, in general, really is about how the top 1-in-5 families are taxed.

44deagle · Post by **44deagle** » Tue Jul 10, 2012 7:44 pm

George - Right, but let's say the tax cuts expire, do people in 10% and 15% tax bracket have to pay that same rate for dividends? It is my understanding that they will.

George the original one · Tue Jul 10, 2012 7:51 pm

10% bracket goes to 15% regardless of whether the tax cuts expire or Obama's budget is accepted. I haven't seen any proposals extending the 10% bracket. Dividends in the new 15% tax bracket are taxed at that bracket's marginal rate, so 15%, which is what they're already paying on dividends (except for those few people in the 10% bracket who actually received dividends... wasn't their rate 0% on dividends?).

44deagle · Post by **44deagle** » Tue Jul 10, 2012 8:02 pm

Qualified dividends are currently taxed at 0% if you make under 35k. It is my understanding that the taxes on dividends will go up to their ordinary tax rates for these individuals if Bush tax cuts expire, that is my concern. As far as Obama's plan I have no idea what they would be.

George the original one · Tue Jul 10, 2012 8:04 pm

Ha, and I think I got the 10% and 15% brackets backwards... looks like the 10% doesn't exist currently and then reappears.

44deagle · Post by **44deagle** » Tue Jul 10, 2012 8:20 pm

The 10% tax brackets exists. It will go up to 15% if Bush tax cuts expire, another thing that would hurt ERE people.
According to the wikipedia dividend tax page, http://en.wikipedia.org/wiki/Dividend_tax, tax rates on dividends for the bottom 2 tax brackets will go from 0% to 15%-28% respectively. Definitely would be bad for ERE people.

George the original one · Tue Jul 10, 2012 8:30 pm

Got it now! Yes, qualified dividends go from 0% to 15% for the lower brackets. Yes, that would mean you need an extra 3.75 years worth of expenses saved if you're following the 4% rule and haven't taken advantage tax free income (or do not have 15% leeway in your budget). 3.75 years of expenses saved represents an extra year of work if you're at the 70%-80% saving rate...

44deagle · Post by **44deagle** » Tue Jul 10, 2012 8:42 pm

Also, corporations would have incentive to do stock buybacks instead of upping dividends under that situation.

dragoncar · Post by **dragoncar** » Tue Jul 10, 2012 10:37 pm

Yeah, from a selfish standpoint it's not optimal. But from a social standpoint I'm OK with the increase.
"Also, corporations would have incentive to do stock buybacks instead of upping dividends under that situation."
So? When the cuts were implemented, corporations were given an incentive to issue dividends instead of doing stock buybacks. Are you against incentives in general, or do you just have a thing for dividends?