Gone4Good
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Sep 9, 2005
- Messages
- 5,381
Ordinary dividends are already taxed at the normal rate, only qualified dividends are taxed at a lower rate (And I didn't say anything about capital gains being taxed at a higher rate than earned income). But, it is my understanding that qualified dividends will be taxed at normal rates too starting in 2011, when the Bush tax cuts expire for high earners. So all dividends (except tax-exempt dividends) should be taxed as ordinary income starting next year (again for high earners only). So someone in the top tax bracket who currently pays 15% in taxes on qualified dividends will pay at least 39.6% in taxes on those same dividends starting in 2011 and 42.5% in taxes (39.6% federal income tax + 2.9% Medicare tax) on those dividends whenever the proposed Medicare tax goes into effect. That would be one hell of a tax increase.
You're absolutely right on the ordinary dividends. But I don't think so on the 2011 numbers. The Tax Foundation shows Long-term Capital Gains rates in 2011+ at 20%.**
** edit: You're right on both counts. The LT Gains rate is 20% in 2011 but the qualified dividend reverts to ordinary income rates under current law.