Financial Management Insight flipbook 2024

After the Tax Cuts and Jobs Act of 2017 nearly doubled the prior standard deduction amounts and eliminated the deduction for personal exemptions, more taxpayers take the standard deduction rather than itemizing deductions, leading to a less complex tax filing season. *The net investment income tax (also called the Medicare surtax on net investment income) applies to the lesser of (a) net investment income or (b) the amount by which modified adjusted gross income (AGI) exceeds the above thresholds. It does not apply to municipal bond interest or IRA/qualified retirement plan withdrawals. Source: Internal Revenue Service, 2023 Investment Tax Rates The tax code treats capital gains and dividends differently from ordinary income, such as that received from wages or interest from bonds and savings accounts. High-income taxpayers may also be subject to a 3.8% net investment income tax on capital gains, dividends, interest, royalties, rents, and passive income if their modified adjusted gross income (AGI) exceeds $200,000 (single filers) or $250,000 ( joint filers). Single filers Joint filers Tax rate Long-term capital gain and dividend tax (2024 taxable income thresholds) Up to $47,025 Up to $94,050 0% $47,026 up to $518,900 $94,051 up to $583,750 15% Over $518,900 Over $583,750 20% Net investment income tax (2022 AGI thresholds) Over $200,000 Over $250,000 3.8%* Short-term capital gains on investments held 12 months or less are taxed as ordinary income, so investors in the top 37% tax bracket could owe up to 40.8% on short-term gains.