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Tax breaks and dividends coming and going

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. I’m confused about the tax changes for dividends in the new tax law. Wasn’t the tax rate for taxpayers in the lower tax brackets, such as my children, supposed to go to zero? N.C., via e-mail

A. Yes. The 2003 tax act reduced the maximum federal income tax rate on long-term capital gains and qualified dividends to 15 percent; 5 percent for taxpayers in the regular 10- and 15-percent tax brackets. Originally, the 5 percent figure for lower-income taxpayers was scheduled to fall to zero for 2008 only. But the new 2006 tax act extended the zero percent rate for two more years, through 2010.

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