How are dividends taxed?

How dividends are taxed depends on whether they are qualified dividends or nonqualified (ordinary) dividends. Regardless of the dividends earned, they are reported with Form 1099-DIV. You will know the total amount of qualified dividends received on Box 1(b) of Form 1099-DIV. The unqualified dividends are reported on Box 1(a).

Nonqualified dividends tax calculator

The ordinary dividends reported on Form 1099-DIV are taxed at the regular federal income tax rate which means it will add up to your gross income. You will pay taxes on the nonqualified dividends the same way as you pay taxes on your other income such as wages or self-employment income. So there isn’t really a difference.

Use tax calculator to figure out tax liability and tax refund included with dividends.

Qualified dividends tax calculator

the qualified dividends reported on Form 1099-DIV are taxed at the capital gains tax rate. So you’ll pay 0, 15, or 20 percent of the income earned from qualified dividends. What portion of qualified dividends you’re going to pay in taxes depends on your federal income tax bracket.

How to grow dividends tax-free?

It’s possible to grow dividends tax-free by investing them in a retirement plan such as a 401(k) or Roth IRA. This will enable you to keep your dividends and watch them grow not paying taxes. We highly suggest speaking to a financial advisor or an advisor from the retirement plan provider company to see your options on how to invest your dividends.

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