Reduced Tax Rate on LT Cap Gain & Qual. Dividends Set to Expire?

The Tax Increase Prevention and Reconciliation Act of 2005 provided for special, lower tax rates for certain income brackets for long term capital gains and qualified dividends, through tax year 2010. Has there been talk of extending this beyond 2010? (At least last I heard the lower tax rates on LTCGs and qual. divs. are set to expire.)

Reply to
Elle
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Congress hasn't done anything.

Obama's called for renewing only some parts of Bush's tax cuts - in particular, only the parts which fall on folks who make below $250,000. If he's true to his campaign promises, he'll have to introduce a bill which extends both those rates, as well as the current set of brackets up to and including much of the 33% bracket.

[related, but not exactly the same issue:]

Similarly, the House approved a fix to the impending estate tax nightmare - in late 2009, the House approved extending the 2009 rates and exemption into 2010 (and beyond?) but it never got anywhere in the Senate and, of course, never made it to the Prez's desk.

According to new reports, Reid (D) and Kyl (R) are "working on a fix, but so far their effort has failed to produce a consensus." Moreover, some of the proposed fixes include retroactively reinstating the tax from Jan 1, 2010, which may have some constitional issues. But the longer Congress doesn't fix this, the worse this problem's going to get. There was apparently some estate tax fixing provisions in the original jobs bill that Reid then stripped down in an effort to get any jobs bill passed as quickly as possible.

Anyway, sorry, as far as I've seen, no news at all about actual proposed legislation to deal with extending 2010 tax rates forward. The ongoing failure to deal with the estate tax doesn't bode will for fixes for other parts of the tax code which are set to expire soon.

Reply to
BreadWithSpam

Oh it's not a big deal. I just keep certain aspects of tax law in the back of my mind while maintaining my portfolio, remembering too it all can change. Mostly I figure that, if I get hit with higher taxes, so will pretty much everyone else, and the ensuing effect of it all, at least within my lifetime, tends towards a wash. That is, I am well off enough and likely (though not definitely) will remain so. I continue to expect taxes to rise in the coming years to deal with the deficit etc.

Thank you for sharing your understanding of the situation.

Reply to
Elle

Correction $250,000 is for a married household income. Cut that in half for a single person.

Reply to
rick++

On Mar 2, 12:55 pm, snipped-for-privacy@fractious.net wrote: [snip]

[snip] [snip]

Oh, if Congress gave us some predictability, then all the fun would be out of it. But if you get the population used to change, then even profound stuff can be passed off as 'legislation' and fewer eyebrows will be raised. A lot of change is simply destabilizing ... no pun on some computer OS, of course.

I really wish I had something profound or even concrete to say, like the increasing number of millionaires in the U.S.A. and the world, Chinese billionaires, or some data on salaries and their spreads, or even data on taxes actually paid. But on dividends and cap gains, it looks like the next ten years will see a maximum 20% on each. The link between the two seems to be established. With baby boomers coming closer to retirement, interest rates at very low levels, and reduced capital to work with, I don't think a broad tax increase would be tolerated.

Some article I stumbled across a year ago noted that the overall level of taxation that an economy will tolerate is somewhere around 17% - above that, stangulation occurs. I believe the data is available Googling 'worldwide taxation.'

Reply to
dapperdobbs

The TurboTax website says: In 2011, the maximum long-term capital gains tax rate goes back up to

20 percent from 15 percent. A lower 10 percent tax rate is used by individuals who are in the 15 percent tax bracket. Their long-term capital gains had been tax-free since 2008. In 2011, dividend income (other than capital gain distributions from mutual funds) is taxed as ordinary income at your highest marginal tax rate.

-- Ron

Reply to
Ron Peterson

Thanks, Ron. After reading the above, it's all coming back from several years ago how things probably will look tax-wise in 2011 for me.

Reply to
Elle

Every time they call something a "simplification" act (or anything suggesting sense or rationality), you can pretty much safely assume that it's going to make lots of money for lawyers, accountants, and perhaps insurance companies.

FWIW, after I posted that article, I came across a very brief article about some of the things that the Prez has actually submitted as part of his budget proposal. (ie. contrary to what I said, some attempt at real action, as opposed to just campaign hot air, has in fact been put forth)

(a) the 33% income tax rate goes to 35% (b) the highest bracket goes back to 39.6% [all the other brackets stay the same]

New 35% rate would apply to singles making > $190,000 (approx) and to couples making > $230,000 (approx)

(To Elle's original question:) (c) taxpayers in these top two brackets would face 20% tax rates on LT cap gains and qualified divs. [folks in the other brackets keep them at 0 and 15%]

and (d) I'm not sure if it's in his budget proposal, but apparently, Obama also want the AMT baselines amounts from '09 to be the new permanent base, and for them to be adjusted for inflation going forward. That's a huge fix and it's about time someone seriously makes such a permanent fix to the AMT (well, short of just either getting rid of either AMT or getting rid of the other tax code. One or the other and be done...)

Anyway, that's what I can find right now. It's all quite high up in the air, so don't make any big bets on any of this.

Reply to
BreadWithSpam

On Mar 3, 12:28 am, snipped-for-privacy@fractious.net wrote: [snip]

Thanks for the provisional look.

I didn't find the article I was looking for, but have:

List of countries by tax revenue as percentage of GDP:

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Tax [a discussion of]
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[country specific]
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Some numbers I'd like to see are the actual costs of raising a family of four in a nice neighborhood, through four years of Ivy League - i.e. what is the cost of "The American Dream" these days.

Reply to
dapperdobbs

snip

snip

Understood. At least it can be estimated that there is nearly two years time (that is, the end of tax year 2011) to achieve the above, if Congress so desires. Then again I would happily forego the tax break above in favor of other national priorities. Thanks for your research.

Reply to
Elle

For property held over five years, the maximum capital gains tax rate goes back up to 18% (and the rate goes back up to 8% for those in the 15% tax bracket).

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Mark Freeland snipped-for-privacy@nyc.rr.com

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Reply to
Mark Freeland

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