Are taxes higher on dividends or capital gains?

Question

In other words is it better to take a dividend if it's taxed lower than the tax on capital gains you would have if you sold the stock?

Answer 1

Long term capital gains and qualified dividends are taxed at the same lower rate.

Short term capital gains and non-qualified dividends are both taxed at your marginal tax rate.

Answer 2

Numerically it would obviously depend on the size of the capital gain and the size of the dividend, I assume that you mean as a percentage.

Dividends are taxes at your respective income tax bracket as are short term capital gains (less than one year). Long term capital gains are taxed at 15% which is almost always lower than your tax bracket. Note: If a democrat wins next year's presidential race that 15% LTCG tax will likely increase.

To summarize, if you have held a security for over 1 year you will currently pay less taxes (as a percentage) on a LTCG. If you have held the security for under 1 year you will pay the same percentage on a STCG as you will on a dividend.