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When figuring out which tax bracket you are in, do you use just the figures for pension and Social Security? Or do interest and dividends affect the rate also? I seem to be having a major senior moment tonight.

"Taxable income" is what tells you your bracket. Find the range for that number in the Tax Rate Schedules, and you'll have your bracket. But remember that this is rate that your last dollar of income is taxed at. The first, and quite a few after that, isn't taxed at all, then it's 10% for a while, 15% for a while, 25% for a while, etc.

What I am really trying to do is figure out how badly my husband and I are going to be hurt by the change in how dividends are going to be taxed in 2011.

I might be better off selling some of the stocks that don't go anywhere but pay wonderful dividends. In 2011, the dividends will be taxed at 36 or 39.6% vs. the present 15%.

M'dear, if you have enough income that you're in the 36% bracket, should it return, you have better things to worry about.

We might be better off in the future selling growth stocks with only 20% of the gain going to taxes.

And why exactly is your crystal ball telling you that dividends won't continue to receive favored tax rates but LTCG's will?

IMO you're overthinking this for fear of paying a penny "too much" in tax. Don't shoot yourself in the investment foot in the process.

Rule Your Retirement Home Fool
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