With the American Taxpayer Relief Act of 2012, Congress has managed to deliver the most convoluted tax rates for capital gains and dividends in the last 25 years. First, the simple part--the tax rates for capital gains and dividends are the same rate. The confusion is that the rate for dividends and capital gains could be one of four different rates.

Seniors make out the best as explained at the Retirement Income Blog . Since seniors are typically in the lower income brackets, those in the ordinary income tax brackets below 25% will continue to enjoy a 0% capital gains and dividend rate. So while seniors may cry about smaller increases in Social Security checks, many have been given a huge gift with this extension of the 0% tax rate on dividends and capital gains..

Most other taxpayers will pay 15%, the same rate as before 2013. This is a very good deal and an extension of the lowest rates that most tax taxpayers have enjoyed in their lifetime.

But some will pay a surtax as part of Obamacare. Individuals earning $200,000+ and married people filing jointly earning $250,000+ can pay up to a 3.8% surtax on their capital gain and dividend income.

The worst hit group includes those single filers earning $400,000+ and married joint filers earning $450,000+ as their base rate on dividends and capital gains is 20%. They of course are also subject to the 3.8% surtax. However, compared to the 39.6% rate that these folks will pay on their earned income, maybe everyone is a winner with the new rates!

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