2010: The Bush tax program also lowered the tax on capital gains—profits from the sale of a capital asset such as stocks or a house—to 15 percent for the highest earners. The same rate applied to dividend income. Lower-income Americans paid zero for either capital gains or dividends.
2011: Unless the cuts are extended, capital gains taxes will rise to 18 or 20 percent for high earners and eight or ten percent for lower-income individuals.
Dividends will resume being taxed as ordinary income, as they were before the Bush years, so taxpayers will pay anywhere from 15 to 39.6 percent on dividends, depending on their annual income.
What Could Happen: In his 2011 budget proposal, President Obama supported preserving the zero and 15 percent rates on dividends and capital gains for lower-income Americans. For married couples with income of more than $250,000 a year and individuals making more than $200,000 a year, dividends and capital gains would be taxed at 20 percent.