My question is what happens to taxation of long-term capital gains and qualified dividends right at the 15/25% marginal rate boundary?
Assume taxable income includes $10,000 of long-term gains and $10,000 of qualified dividends. The boundary for a single taxpayer is at $34,500 for 2011 (the year of interest). Understood that if taxable income is below that level, tax on the capital gains is zero, and on the dividends is $500.
If the taxable income goes up to, say, $35,000, does the tax liability on the gains and dividends step up to $1500 each?
Hank