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prepare for Taxmageddon

Article Index

Taxmageddon 2013 Hits Dividends Hard - Here's What to Do

By , Contributing Writer, Money Morning -

Every dividend investor loves the arrival of those quarterly distribution checks. But thanks to "Taxmageddon 2013" those checks could get a whole lot smaller.

As things currently stand - with higher tax brackets, no extension of the Bush-era tax cuts and the addition of new levies on higher-income payers to fund Obamacare - the tax bite on some dividend payments could rise from as little as 15% to as high as 43.4%.

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Are You Ready for "Taxmageddon"?

By , Contributing Writer, Money Morning -

A slow moving train wreck known as "Taxmageddon" is creeping toward U.S. taxpayers.

You see, if Congress doesn't act by year's end, numerous tax breaks will expire -- and hit every American taxpayer squarely in the wallet.

It's a fiscal tsunami that will strike as early as December. The damage will be so widespread it could derail the entire U.S. economy.

Nobody in Washington, however, is doing anything about it.

"You just don't get the sense that there's even a secret plan yet," Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, told The Washington Post. "It's scary."

If you're not worried yet, you should be.

Here's why...

"Taxmageddon" Means Higher Taxes for All

The Bush-era tax cuts will end on Jan. 1, 2013, unless Congress intervenes.

Also set to expire that day will be a temporary payroll-tax holiday on social security.

The tax changes won't just slam a few income brackets; they'll reach all taxpayers.

Every one of the existing income tax brackets will be ratcheted up, starting with the lowest 10% bracket, which will be hiked to 15%. The 25% bracket will jump to 28%; the 28% bracket will go to 31%; the 33% bracket will be replaced by a 36% bracket and the 35% bracket will soar to 39.6%.

Stock market investors will also be punished.

Right now, the maximum tax rate on long-term capital gains and dividends is only 15%. Starting next year, the maximum rate on long-term gains is scheduled to increase to 20%.
But get this -- the maximum rate on dividends will skyrocket to a whopping 39.6%.

That's not all.

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