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Question about dividends tax in the US


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Ok, so I have a question about dividend tax, especially at the state level.


So say I make about 900k per year. I'm in the 37% tax bracket at the federal level. Now I'm also generally a long term holder of securities so basically all my cap gains and divvies are qualified. The Feds give me a nice deal. I only pay 20% tax on both my cap gains and the dividends. But then they are also included in my income. So when I go down to the state level I get no breaks for them.


So if i were to be in a state like North Carolina (income tax=5.25%) then my effective tax rate will be 29.05% (20% federal+5.25 state+3.8% Obamacare levy) on both the nominal value of capital gains and dividends. Correct?

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I’m not a tax lawyer but:


1. What you did is indeed what I personally do to calculate my “dividend tax rate.” Note that some places have quirky rules though (e.g., NH doesn’t tax earned income but taxes dividends).


2. What I meant by “divided tax rate” above actually is the marginal tax rate on my dividend income. That may or may not equal the effective/average tax rate.

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