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Posted by Alan on January 4, 2008, 7:29 pm
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njoracle wrote:
> I understand that the tax rate for qualified dividends (and capital
> gains) is 0% if your joint return had taxable income $65,150 or less.
>
> Suppose I have the following (joint return, both H&W over 65):
>
> Pension 40,000
> Social Sec 18,000
> Dividends 15,000
> of which 8000 are qualified dividends.
>
> In 2007 from above, total Income is 73,000 less 18,000 in deductions for
> a taxable income of $55000. Tax due is based on $55,000 which equates to
> about $7000. If I have basically the same income for 2008, can I reduce
> the total income by $8000 (due to qualified dividends not being taxed)
> to $65000? If so, this should reduce my tax by about $800 (roughly).
>
> Are my assumptions correct?
>
Your assumptions and numbers are not correct. $55000 of AGI w/o
SSA benefits would trigger 85% of your SSA benefits being taxed.
Subtracting your std deduction plus kicker for those over age 65
and your two personal exemptions gets your taxable income below
the 25% marginal tax bracket. As such, your qualified dividends
in 2007 would be taxed at 5%. In 2008, they would not be taxed.
You save 5% of $8000 = $400.
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