Wednesday, May 10, 2006

What tax rate do your clients pay on capital gains? Are you sure?

Looks like the 15% tax rate on dividends and long-term investment gains will survive for at least another two years.

But your affluent clients won't necessarily be paying that low rate. Why? This New York Times article explains:

"Because of the alternative minimum tax, more than a third of investors last year paid taxes higher than the 15 percent rate sponsored by President Bush on their long-term capital gains, a new Congressional report shows.

"These investors paid more than $7 billion in higher federal and state taxes than they would have under the regular income tax system, according to calculations by The New York Times based on the new report."

2 comments:

Jim Gust said...

I'd like to see the Times show their work on this tax problem. This is one of those classic situations of Congress throwing a lot of dirt in the air so we can't see how the tax system works. Capital gains are supposedly not subject to the AMT, yet they do get counted so that other income might become subject to it. Thus, we get all the incentive effective of telling people that they'll get the low tax rate reward, without actually having to give it to them.

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