Get Rich with Dividends: A Proven System for Earning Double-Digit Returns

CHAPTER 12

Taxes

I was hesitant to write this chapter. In fact, I didn’t even include it in the table of contents in the proposal to my publisher. What I really hate is how complicated taxes can be. It’s why this chapter wasn’t in my original plans for the book. However, taxes are an important issue that needs to be addressed.

Keep in mind that I am not a tax expert. I will cover only the basics of tax law as it pertains to dividends. If you have any questions, you should always seek the advice of a tax professional.

Here’s what you need to know:

Dividend tax rate=15%

That’s it. Any questions?

OK, it’s a little more complex than that.

In 2012, if you are in the 25% tax bracket or higher, your dividend tax rate will be 15% on all qualified dividends.

That’s been the case since 2003, when President Bush signed the Jobs and Growth Tax Reconciliation Relief Act. In 2010, President Obama extended the tax cuts that set the dividend tax rate at 15%. It is unknown at this time if he and Congress will extend it again or if they will let it expire at the end of 2012.

If the tax cuts expire, it is expected that dividends will be taxed at the individual’s ordinary income tax rate. Of course, in politics, anything can happen and tax policy may change considerably at any time.

But if you’re reading this just when it was published because you ran to the bookstore or ordered it online as soon as the book was available (thanks, Uncle Bob), you will pay 15% tax on your qualified dividends.