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PostHeaderIcon Tax Planning for 2013 – The Tax Rate on Dividends

Last week we talked about capital gains and this week, we’re going to talk dividends.  This year, most dividends will be taxed at the capital gains rate which maxes out at 15%.  If nothing is done, that special rate goes away and dividends will be taxed at your marginal tax rate which could go as high as 39.6%.  If you thought the 5% increase on capital gains is big, managing your dividends if you’re able to is an even bigger deal.

For a lot of people with stock investments, there is no control over the dividends.  You can opt to move to stocks that pay no dividends and you might see some of that.  Where this rate change will really see an effect is if a person owns a C-Corporation or has an S-Corporation that has some C-Corporation earnings and profits.  If you do and you have some cash sitting around, you might want to look at pulling it out as dividend.  I wouldn’t do it until after the election although you can get an idea on what the political climate is going to be like, but until then, you have some time to assess the situation.

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