are dividends taxed as income
Ordinary dividends and qualified dividends each have different tax rates: Ordinary dividends are taxed as ordinary income. Qualified dividends are taxed at a 20%, 15%, or a 0% rate, under current law. For more information, see capital gains. 1 For investors with personal income tax brackets of 25% or higher, they will pay a 15% dividend tax on their qualified dividends. 2  For investors in a lower income tax bracket, they will pay a 5% dividend tax. 3  Qualified dividends must be paid between January 1, 2003 and December 31, 2010. In the beginning of income tax history, dividends paid to shareholders were exempt from taxation from the passage of the 16th Amendment in 1913 to 1953, except for a four year period from 1936 to 1939 where dividends were taxed at an individual’s income tax rate (when the top income tax rate was 79%). For example, if you're married filing jointly, your dividend income will not be taxed if your ordinary income is less than $74,900. You will be on the hook to pay a tax, however, if ordinary income puts you in an income tax bracket that is above those two lowest levels. For those, the your dividend tax rate depends on your ordinary income tax rate, but tops out at the maximum capital gains rate, which is 15% or 20%, depending on your tax status. If your stocks are held in a taxable account, you report qualified dividends on Line 9b of IRS Form 1040. The United States’ top federal marginal tax rate on qualified [1] dividend income is 23.8 percent. U.S. states also tax dividend income at rates ranging from zero to 13.3 percent. [2] Combined, the U.S. average top marginal rate is 28.6 percent. 1 Ordinary dividends are taxed as ordinary income. 2  Qualified dividends are taxed at a 20%, 15%, or a 0% rate, under current law. 3  For more information, see capital gains. Qualified dividends are reported on Form 1099-DIV in line 1b or column 1b. However, not all dividends reported on those lines may have met the holding period requirement. Those non-qualified dividends, as well as other ordinary dividends, may be taxed at your ordinary income tax rate, which can be as high as 39.6%. Currently, ordinary dividends and short-term capital gains those on assets held less than a year are subject to one's income tax rate. However, qualified dividends and long-term capital gains benefit from a lower rate. Real Estate Investment Trusts REIT dividends are mostly taxed at ordinary income tax rates. However, after the year-end, a REIT may designate a portion of its prior year's payouts as qualified dividends, which qualify for the maximum 15% rate. On average, roughly 20% of annual payouts fall into this category.
Yes