Dividend Stocks For Those Who Live Dangerously

Dividends and capital gains produce equivalent gains, but their tax rates will now be very different. The top marginal tax rate for dividends is rising from 15% to 44.6%, but the top rate for capital gains is increasing from 15% to 25%. In 2013 this number is calculated by a 20% capital gains tax plus 3.8% for Obamacare and an additional 1.2% for deduction phaseouts.

Taxing capital gains at 25% while taxing dividends at 44.6% will result in fewer companies paying dividends. This will in turn have an effect on the dynamics of the market. The double taxation of dividends and capital gains continues to reflect the populist bias of those who don’t understand basic economics. Until dollars are treated equally, it is best to be wary of the tax code and adjust accordingly.

Source: Forbes

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