Good News/Bad News: For Dividends, New Tax Law Means Lower Rates But More Headaches

by Ellen J. Boling

The good news: The tax rates went down.

The bad news: Simplification went out the window.

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It is hard to imagine that taxes could get more complicated. But for dividends, at least, they just did. Prior to the passage of The Jobs and Growth Tax Relief Reconciliation Act of 2003, income taxation of dividend income was a relatively simple concept. All dividend income was treated as ordinary income and subject to tax at the taxpayer’s marginal tax rate. In 2002, the highest marginal tax rate for an individual taxpayer was 38.6%.

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