Assume that the Bush 2003 tax cut on dividend income is repealed, and that you will now have to pay tax on dividends at your marginal tax rate of 40% instead of at the current rate of 15%.
How much less will you net after taxes if you earn $5,000 in dividend income?

Question

Quizplus · Accepted Answer

With the tax rate on dividends increasing from 15% to 40%, the additional tax you would pay on $5,000 of dividend income is calculated as follows: $5,000 * (40% - 15%) = $5,000 * 25% = $1,250. This means you will net $1,250 less after taxes under the new tax rate.

Assume That the Bush 2003 Tax Cut on Dividend Income