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Anne
Anne, Master Tax Preparer
Category: Tax
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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My wife and I earn about $100,000 in dividends from bonds and

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My wife and I earn about $100,000 in dividends from bonds and mutual funds every year and have been unemployed with no other income for a few years. We have paid 15% tax to uncle sam in the past, on the dividends. I read somewhere that if you fall below the 15% "income tax" bracket, taxes on dividends are 5%. With no jobs, we have no "income" and pay no "income tax". Should we have been paying 5% all those years? We are also wondering how the new law for 2013 will effect us.
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Thank you for your question, and thanks for using JustAnswer.com. With the level of dividend income that you have, you would not be in the 15% bracket. Your dividend income is included when you calculate your tax bracket, although then that income is given a preferential rate. So, even though you had no jobs and paid no income tax on wages, you were still above the 15% tax bracket and therefore the tax you paid is correct. You were in the 25% tax bracket.

The new law for 2013 will affect you. Instead of being taxed at 15%, your dividends will be taxed as ordinary income. With $100,000 per year, if you take the standard deduction, your tax will be about $12,200 and you will be in the 25% tax bracket. The reason that your tax is not 25% of your income is because our tax rates increase, so you pay 10% on so much income, 15% on a little more, and then 25%. The estimated tax is just a rough estimate. CLICK HERE to read more.

Please let me know if any of this is unclear. Thanks again for using JustAnswer and have a happy New Year.

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You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

Expert:  Anne replied 1 year ago.

Hi

 

Different expert here.

 

Since you stated that your dividends are from mutual funds and bonds, your tax rate will raise from 15% to 20%.

 

Should you and your wife have more than $200,000 in dividends, then the 3.8% medicare tax will also apply.

 

Please see below:

 

http://apiexchange.com/index_main.php?id=8&idz=236

 

I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.

Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1638
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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