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News Link • TAXES: Federal

How to Handle the Coming Dividend Tax Hike

 Apple (AAPL: 609.08, 2.10, 0.35%)'s dividend announcement this past week is good news for income investors, but bad news might be lurking around the corner.

Unless Congress takes action, the top tax rate for the highest earners on most dividends, currently 15%, is set to jump to a whopping 43.4% next year. That is a maximum income-tax rate of 39.6% -- since dividends will once again be taxed as regular income -- plus a 3.8% tax on investment income as part of the health-care overhaul passed in 2009.

Higher dividend taxes could take some luster off dividend-paying stocks -- and because the market is forward-looking, the fear is that their prices will fall sooner rather than later.

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