Top tax rates on investment income under new law

A look at the higher tax rates on investment income under the new tax law

Associated Press

The recent "fiscal cliff" agreement in Washington preserved tax rates that investors with moderate to low incomes pay on investment income such as capital gains and stock dividends. Not so for top earners, who will pay higher rates on income earned this year.

Below is a look at the rates that taxpayers in the highest bracket will pay on investment income earned in 2013, compared with last year's rates. The top bracket includes taxpayers with adjusted gross income of $450,000 and up for couples filing jointly, and $400,000 for single filers.

The 2013 rates include a new 3.8 percent tax to pay for President Obama's health care overhaul. That tax applies to taxable investment income for joint filers with adjusted gross income of more than $250,000 and single filers earning $200,000. So taxes on investment income will also be higher for taxpayers with earnings above those thresholds.

Types of income 2012 top tax rate 2013 top tax rate Breakdown of 2013 rate
Qualified dividends and long-term capital gains 15% 23.8% 20% new rate plus 3.8% health care tax
Short-term capital gains and taxable bond interest 35% 43.8% 39.6% ordinary income rate plus 3.8% health care tax
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