Christine Benz for MorningStar writes: Two years ago, many investors were on tenterhooks as Congress wound down
its session. A host of the Bush-era tax cuts were on the chopping block
as part of the so-called "fiscal cliff," including the reduction in the
tax on dividends and the high estate-tax exclusion.
In the end, Congress made only modest adjustments to
investment-related taxes back then; for example, a 39.6% marginal tax
rate went into effect for the highest-income earners in 2013, and the
new Medicare surtax kicked in on schedule, too.
Since then, the tax-related drama has been pretty subdued by
comparison. Dividend and capital gains tax rates have stayed the same,
and the federal estate tax will only affect the uber-rich. But that's
not to suggest that investors can safely tune out tax considerations.
The market's strong performance, combined with a nasty season for mutual fund capital gains distributions,
accentuates the value of taking maximum advantage of tax-sheltered
wrappers like 401(k)s and IRAs, for example. It also highlights the
virtues of carefully monitoring your taxable positions to help insure
that you're not paying more in dividend and capital gains taxes than you
need to.
Here's an overview of what's changing, tax-wise, in 2015, as well as
what's staying the same. I've emphasized those tax items that have at
least some connection to investments.
Dividend and Capital Gains Taxes
Not too much to report here. Dividend and capital gains rates will remain the same in 2015 as they were last year, though the income tax brackets used to determine those rates have been adjusted for inflation. Investors who are in the 39.6% income tax bracket will pay a 20% tax rate on qualified dividends and long-term capital gains; investors in the 25% to 35% brackets will pay a 15% tax rate on qualified dividends and long-term gains; and investors in the 10% and 15% tax brackets for income tax will owe 0% tax on dividends and long-term capital gains. Nonqualified dividends, such as from REITs, and ordinary income from taxable bonds will be taxed at investors' ordinary income tax rates.
Not too much to report here. Dividend and capital gains rates will remain the same in 2015 as they were last year, though the income tax brackets used to determine those rates have been adjusted for inflation. Investors who are in the 39.6% income tax bracket will pay a 20% tax rate on qualified dividends and long-term capital gains; investors in the 25% to 35% brackets will pay a 15% tax rate on qualified dividends and long-term gains; and investors in the 10% and 15% tax brackets for income tax will owe 0% tax on dividends and long-term capital gains. Nonqualified dividends, such as from REITs, and ordinary income from taxable bonds will be taxed at investors' ordinary income tax rates.
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