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While both are indeed taxed, dividends are taxed as ordinary income, whereas gains from sale of stock are considered and taxed as capital gains. In the US at le
by crazycanuck 12y ago
While both are indeed taxed, dividends are taxed as ordinary income, whereas gains from sale of stock are considered and taxed as capital gains. In the US at least, the capital gains rate is somewhere around 1/4 to 1/2 of the ordinary income rate, so it's much more "tax efficient" to do a buyback than to pay dividends.
- im3w1l 12y agoUh, what about Qualified Dividends? http://en.wikipedia.org/wiki/Qualified_dividend http://en.wikipedia.org/wiki/Qualified_dividend
- crazycanuck 12y agoVery good point, I was unaware these were still in effect (haven't been a US tax payer in several years).
- ElComradio 12y agoIn the popular media the impression is that dividends are not taxed as ordinary income. The reason those evil rich trust fund guys pay lower taxes than the secretary etc.