Dividend Stocks Could Face Big Hit If Tax Cuts Are Not Renewed

Posted by adaniels in Blog on July 17, 2012

According to a new report, there could be financial consequences to dividend stocks if the Bush-era tax cuts are not renewed, OnWallStreet.com reports. The Edison Electric Institute said that investors could be taking a big financial hit if the taxes on such stock go back to their old levels. The current rate is 15%, but would expire if the tax cuts are not renewed by the end of the year, with the rates going as high as 39.6%.

OnWallStreet.com says that the institute’s study looked at what would happen if the previous taxes returned, and found, according to the publication, that “any rate increase could cause a major sell-off and drain value from the normally stable companies known for high yields rather than volatility.”

President Barack Obama wants to renew some of the tax cuts, but not the ones for those affecting people with household incomes of $250,000 a year or more. Republicans want to extend all of the tax cuts.

Jeff Sica of Sica Wealth Management said that if the tax cuts are not renewed, investors may sell off their dividend stocks. “Taxation of dividends and higher capital gains tax will make individuals more likely to sell before January if there is an anticipation of higher taxes,” Sica said. “If tax cuts expire, individuals will invest less since it will cost them more in capital gains tax.”

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