Estate Planning and Tax Lawyer Blog

Prior to the 2010 Tax Relief Act, long-term capital gains and qualified dividends have been taxed at a maximum rate of 15%, with taxpayers in the 10 and 15% brackets having a zero person tax rate on this income. With the expiration of the Bush tax cuts, the long-term capital gains would return to a maximum rate of 20% and qualified dividends would vanish and be treated as income subject to a normal tax rate. The 2010 Tax Relief Act extends the 15% maximum tax rate for long-term capital gains and qualified dividends until the end of 2012. The lower capital gains rate will cost $25.9 billion and the lower qualified dividend tax rate will costs $27.3 billion to put in effect.

Due to the 2010 Tax Relief Act, the lower capital gains rate will cause fewer individuals to close deals or sell assets to lock in their rate. There will also be an extension of the 100% gain exclusion for the sale of qualified small business stock acquired at the original issuance between September 27, 2010 and January 1, 2012 and held for more than five years.