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Capital gains and dividends tax relief

Under the American Taxpayer Relieft Act ("ATRA") of 2012

Tax on long-term capital gains and qualified dividends

The ATRA aligned the tax rate for long-term capital gains and qualified dividends for taxpayers depending on their marginal income tax bracket. Low-income taxpayers don't pay any tax on qualified dividends or long-term gains, while the 15% rate was made permanent for all other brackets except the highest, which pay 20%. The rates are broken down for 2015 and 2016 as follows: 

Marginal ordinary income tax rate Qualified dividend tax rate Long-term capital gain rate
10% 0% 0%
15% 0% 0%
25% 15% 15%
28% 15% 15%
33% 15% 15%
35% 15% 15%
39.6% 20% 20%

Qualified dividends are those received from U.S. and qualified foreign corporations. Prior to 2003, all dividends were taxed as ordinary income, similar to how short-term capital gains (for assets held less than one year) continued to be taxed. 

Additionally, higher income taxpayers may also be subject to the Net investment Income Tax, which could add a 3.8% tax to investment income for taxpayers above the income thresholds.