And using offshore accounts or holding companys aren't particularly effective methods for shielding income for tax purposes (since offshore accounts are subject to a whole whack of anti-avoidance rules and holding companys are typically subject to more or less the same tax rate as people in
the top marginal tax bracket - the Tax Act has tightened up a lot since the 1960s so there really aren't that many «loopholes»).
Having said that, the capital gain rates are pretty low, so we're historically, when you look at capital gain rates — Jackie could probably talk to this even more historically — but if you're not in
the top marginal tax bracket, your federal rate is 15 %.
Also, at
the top marginal tax bracket dividends are taxed at the same rate as capital gains.
I don't believe that everybody should just maximize their contribution every year just because they can (unless they have incomes in
the top marginal tax bracket).»
Not exact matches
Finally, the value of deductions rises with
marginal tax rates, which are higher for those with higher incomes: someone in the bottom
tax bracket only gets a 10 - cent subsidy for $ 1 of deductions while someone in the
top bracket gets 39.6 cents.
Under previous
tax law, a 0 % long - term capital gains
tax rate applied to individuals in the two lowest
marginal tax brackets, a 15 % rate applied to the next four, and a 20 % capital gains
tax rate applied to the
top tax bracket.
And of course if you're in the
top tax bracket with a
top marginal tax rate of 46 %, the situation is even more dire: as a reader commented below, it would require $ 1,850 of gross income to generate $ 1,000 after -
tax capital.
In addition, the amount of the capital gain is
taxed in a
marginal fashion, such that any portion of the gain that will «fit» into a lower
bracket will be
taxed at a lower level, with only the topmost portion of any gain being
taxed at the
top rate.
Trump has also promised to reduce the number of
tax brackets from seven to three, and to drop the
top marginal tax rate from 39.6 % to 33 % — potentially making U.S. residency attractive to Canadians currently paying higher
tax rates.
Dividends and long - term capital gains are
taxed at special rates of either 0 % (if you're in the 10 % or 15 %
marginal tax brackets), 20 % (if you're in the
top tax bracket), or 15 % (everybody else).
You might be in the 25 %
marginal tax bracket for federal income
taxes, but on
top of this you might add, say 7 % for state income
taxes, 7.65 % for FICA, and say, 2 % for municipal income
taxes, for a total
marginal tax rate of 41.65 %.
By 1918, there were 55
tax brackets, with a
top marginal rate of 77 percent.
If we allocate the low - margin
tax brackets to your Social Security, you'd still have $ 31,700 drawn from your retirement assets that would be
taxed at the 15 % and again only the
top $ 16,300 would be
taxed at the full 25 %
marginal rate.
While everyone's individual circumstances will likely vary, calculations throughout the article will assume current
tax rules and a high net worth individual in the
top marginal tax - rate
bracket.
Between federal and provincial
tax changes, the combined
marginal tax rate for Albertans in the
top bracket is rising to 48 per cent in 2016, from 40.25 per cent last year.
But let's assume that you are in the
top 1 % of income earners and your last
marginal dollar does fall into the highest of
tax brackets.
A further problem is that there are differences across the
tax brackets: someone in the lowest
bracket in Ontario has a negative
marginal tax rate on eligible dividends, while at the
top tax bracket dividends are
taxed at a higher rate than capital gains.
Converting the entire account may drive the couple's
marginal tax rate into the
top 39.6 %
bracket, which is so high that they probably would have been better off just leaving the money as a pre-
tax IRA and spending it in the future at a lower rate!
In all three cases, once the AGI income threshold is reached, the
marginal tax rate increases to recognize not only the rising
tax brackets, but the surtaxes for Pease and PEP on
top (and the cumulative impact of PEP given multiple family members with simultaneous exemptions phasing out).
Ordinary gains are
taxed at the
top marginal income
tax rate of 37 percent, while capital gains
tax rates run as high as 15 percent depending on the
tax bracket.