Bush Victory Likely To Mean Extended Tax Relief For Investors

by Mike Godfrey, Tax-News.com, Washington

11 November 2004

The re-election of George W. Bush to the White House means that many US investors can look forward to a longer period of tax relief on capital gains and dividends income, although not all investors are set to benefit from such a measure, according to one expert.

"It's likely we'll see a permanently reduced capital gains tax rate and a permanently reduced tax rate on stock dividends," predicts Peter Hupalo, author of ‘Becoming An Investor: Building Wealth By Investing In Stocks, Bonds, And Mutual Funds,' of Bush's next four years.

The Jobs and Growth Tax Relief and Reconciliation Act of 2003 cut both capital gains tax and dividend tax on qualifying stocks to 15%, initially for a limited period in deference to legislators with concerns over the soaring budget deficit.

However, Hupalo also notes that not all US investors are set to benefit from extended capital gains and dividend tax relief, as the average investor saving for retirement holds stocks in a 401(k) where dividends are exempted from taxation when received, whilst money is taxed as ordinary income when withdrawn.

“So a lower dividend tax rate won't affect stocks in a 401(k) or in an IRA. It's primarily people who hold stocks outside of tax-deferred retirement plans who'll benefit from special capital gain and dividend tax rates," he explained.

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