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>Tax law favors debt, where interest is deductible as a business expense, over dividends Taxation is another reason why buybacks are preferred over dividends:
by sbierwagen 3y ago
>Tax law favors debt, where interest is deductible as a business expense, over dividends
Taxation is another reason why buybacks are preferred over dividends: dividends are taxed as ordinary income but selling stock held for more than a year is taxed at the long term capital gains rate.
The IRA added a 1% tax to buybacks, but to equalize it fully either you'd need to reduce tax on dividends, extend the LTCG horizon past one year, or just eliminate the lower LTCG rate.
- nostrademons 3y ago"dividends are taxed as ordinary income" Not really any more. Dividends on stock held > 1 year are considered "qualified" dividends and are taxed at capital gains rates.
- sokoloff 3y agoMore than 60 days out of the 121 days centered on the ex-dividend date. Your point remains/is even stronger: In the overwhelming majority of cases, dividends and long-term gains have been taxed similarly for the last 20 years.