U.S. taxpayers claimed 60.4% more in capital gains in 2012 than 2011, locking in lower tax rates before the 2013 tax increase took effect, according to Internal Revenue Service data released last week.
Qualified dividend payments rose 50.9%, according to the preliminary data.
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During 2012, long-term capital gains and qualified dividends were subject to a top rate of 15%. Starting in 2013, the top rate was 23.8%, because of the expiration of some of President George W. Bush's tax cuts and an investment tax in President Barack Obama's 2010 health care law.
Taxpayers' actions mirror what happened at the end of 1986, before a capital gains tax rate increase scheduled to take effect in 1987, said Alan Auerbach, an economist at the University of California, Berkeley.
“Capital gains realizations are extremely sensitive to the timing of tax rate changes,” he said. “I don't think anybody disputes that there's a very, very large timing response.”
The $498.7 billion in capital gains in 2012 were concentrated among the highest-earning households. U.S. taxpayers with more than $250,000 in adjusted gross income received 83% of the net capital gains.