May 5, 2021

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Dividend shares to benefit from the proposed capital gains tax

Dividend shares to benefit from the proposed capital gains tax

For investors growing concerned that President Joe Biden will move to increase withdrawals on investment earnings, CNBC’s Jim Cramer on Tuesday offered a strategy to avoid potentially higher taxes aimed at the wealthy.

“If you’re worried about Biden’s plan to raise taxes on capital gains but not dividend income, well, that’s not a reason to sell everything,” the Mad Money host said. “It’s a reason to buy dividend stocks.”

Biden could roll out the change, which would end capital gains tax relief status for millionaires, as soon as this week. As reported, the proposal provides for the tax hike from 20% to 39.6%. The rate could reach 43.4% for the richest taxpayers.

“If the capital gains rate rises to 39.6% and the dividend rate stays the same at 20%, that immediately makes dividend stocks much more attractive,” Cramer said.

“Biden’s plan would create a world where every dollar of dividend income is worth $ 1.32 in capital gains,” he added. “As long as many wealthy investors are concerned about this tax hike, you have to expect investors who want to pay lower taxes to start trading stocks for dividends.”

Cramer approved the following 10 high-yielding stocks with “best stories”:

Disclosure: Cramer’s Charitable Foundation owns stock in Crown Castle.

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