Corporate Tax, Stock Transaction Tax, and Dividend Tax Changes Coming Together — Major Shifts in Investment and Business Strategies in 2024

Corporate Tax Rate Increased by 1% Across the Board — All Brackets Adjusted

Starting this year, the corporate tax rate paid by companies has been raised by a flat 1 percentage point, which means businesses in the U.S. will face higher tax burdens overall. According to tax experts, the new corporate tax rates now range from approximately 10% to 25%, depending on income levels.

For small businesses subject to simplified reporting, the tax rate on taxable income under $20 million is now 20%. For incomes between $20 million and $300 million, it’s 22%, and for amounts exceeding $300 million, it’s 25%. Since all brackets saw a 1% increase, large corporations and mid- to small-sized businesses alike will feel the impact, making it harder to avoid higher taxes regardless of company size.

Stock Transaction Tax Hiked Again After Two Years — Investment Costs Rise

This year, the stock transaction tax rate has gone up by 0.05%, increasing the costs for individual investors trading stocks. This move essentially restores the transaction tax to levels seen in 2023, meaning investors will notice higher trading costs again.

On the main U.S. stock exchange (NYSE), the transaction tax jumps from 0% (plus a 0.15% special tax for rural and coastal areas) to 0.05% (plus a 0.2% special tax). For the NASDAQ and over-the-counter (OTC) markets, the rate increases from 0.15% to 0.2%, adding extra costs for trading small-cap and unlisted stocks.

Since stock transaction taxes are applied to the total trade value regardless of profit or loss, frequent traders—especially those with high volatility strategies—will feel the pinch more. Experts suggest that many investors might shift toward longer-term holding strategies to minimize trading costs, which could influence market dynamics.

High-Dividend Stocks and Split Taxation — Could This Reduce Tax Burden?

On the flip side, changes in dividend taxation could actually benefit certain investors. Starting this year, qualifying high-dividend companies’ dividend income will be taxed separately from other income, rather than being combined with wages, business income, or retirement income.

Eligible companies are those with a dividend payout ratio of 40% or higher, or those with a payout ratio of at least 25% that also increased dividends by 10% or more compared to last year. Investing in these companies means your dividend income is taxed at a separate, often lower, rate, which could reduce the overall tax burden for high-income investors.

For investors pushing into the top income tax brackets due to large dividend earnings, whether dividends are taxed separately or combined can significantly impact net returns. Financial advisors recommend that dividend-focused investors carefully review company payout policies and the split-taxation option to optimize after-tax gains.

Both Companies and Investors Need to Recalculate Their Tax Strategies

With corporate tax, stock transaction tax, and dividend tax rules all changing simultaneously, both businesses and individual investors will need to revisit their financial and investment plans for 2024. Companies should recalculate after-tax profits and dividend capacity to adjust investment and hiring strategies, while investors should analyze trading frequency and dividend strategies to maximize after-tax returns.

Tax professionals emphasize that 2024 marks a major shift in the U.S. investment tax landscape. The introduction of split taxation for dividends could boost demand for high-yield stocks, while the increased transaction tax might dampen short-term trading activity, potentially leading to increased market volatility during the adjustment period.