At what rate are dividends and long-term capital gains typically taxed?

Dividends and long-term capital gains are typically taxed at a favorable rate compared to ordinary income. The most common tax rate for these types of income is 15%. This rate applies to individuals in the middle-income bracket, which reflects the intention of the IRS to incentivize investment and savings.

For taxpayers in the lower income brackets, the tax rate on long-term capital gains and qualified dividends can be as low as 0%. Conversely, high-income earners may face a higher rate of 20%. However, the 15% rate is the most commonly applied rate for the majority of taxpayers, making it an important figure in personal finance and investment strategies.

Understanding this tax treatment is crucial for investors as it impacts the net return on investment and can influence decisions regarding buying, holding, or selling assets. The other rates listed do not typically apply to the majority of taxpayers and represent either lower or higher income tax scenarios that are less common for average investors.