Dividend Tax

The Dividend tax is a tax on the dividends you receive from a company. We would all like to believe there is no tax on dividends but there is.

Here is a brief history of what has happened and what to expect.

In 2003 congress passed the Jobs and Relief Act of 2003. This lowered the dividend tax to 15% or 5% if you were in the 15% or lower tax bracket. Prior to this act the dividends where taxed as normal income, unfortunately the act only lasts until the end of 2008.

So in 2009 dividends will be taxed at the same rate as ordinary income once again unless congress decides to do something about it.

President Obama on the other hand is pushing to make the tax on dividends have a cap of 20%. Previously he has stated that dividend and capital gain tax could go as high as 28%.

In Conclusion currently the tax rate for dividends is at 15%, however it is likely that the tax on dividend income will be much larger in the near future. How much larger is still unknown.