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U.S. Federal Personal Income Tax Rates—2014

Notes

• All amounts referred to in the table and the notes are denominated in U.S. dollars.

Taxation of capital gains

• Capital gains are taxed at a maximum tax rate of 20% for net long-term capital gains,

which applies to the sale of captial assets held for more than 12 months. This 20% rate,

which came into effect in 2013, applies to individuals taxed in the 39.6% tax bracket. A

lower rate of 0% applies to net long-term capital gains that would otherwise be taxed

in the 10% or 15% tax brackets and a rate of 15% applies to net long-term capital gains

which would otherwise be taxed in the 25%, 28%, 33% and 35% tax brackets.

• Gains from collectibles such as art, rugs or coins are not eligible for the full reduced rates,

and neither are gains from the sale of qualified small business (QSB) stock (in excess of

any excluded gains) and of real estate, generally to the extent of depreciation previously

claimed. The top tax rate is 28% for collectibles and QSB stock and 25% for recaptured

depreciation.

• Special rules also apply to sales of principal residences. Individuals are generally permitted

to exclude from taxable income up to $250,000 of gain ($500,000 for married individuals

filing joint returns) realized on the sale or exchange of a residence provided it was owned

and occupied as a principal residence for at least two years out of the five years prior to

the sale or exchange. Only one sale in any two-year period qualifies for the exclusion.

Taxation of dividends

• Qualified dividends are taxed as net capital gains at the rates outlined above. Dividends

which are not eligible for the capital gains rates are taxed as ordinary income.

• Dividends are eligible for these reduced tax rates if, in general, the shares are held for at

least 60 days.

• In general, dividends received from domestic and certain foreign corporations are eligible

for the reduced rates. Those received from passive foreign investment companies are

specifically excluded.

Net Investment Income Tax

• Starting in 2013, individuals are subject to a Net Investment Income Tax (NIIT) equal to

3.8% of the lessor of:

1) Net investment income; or

2) The excess (if any) of modified adjusted gross income over the threshold amount.

• In general, Net Investment Income includes, but is not limited to, interest, dividends,

certain net gains, and rental and royalty income.

• The NIIT does not apply to any capital gain recognized on the sale of a principal residence

that is exempt from tax (see Taxation of capital gains above).

• The thresholds amounts with respect to the NIIT are as follows:

Filing Status

Threshold Amount

Single taxpayers

$250,000

Married individuals filings joint returns

125,000

Married individuals filing separate returns

200,000

Head of households

200,000