What Is a Dividend Tax Rate?


Quick Answer

Stock dividends are taxed either as ordinary income or according to special qualified dividend rates that are lower than those for ordinary income, according to Wells Fargo Advisors. Companies report dividend payments to tax filers on Form 1099-DIV, according to the Internal Revenue Service.

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Full Answer

Unless otherwise stated, dividend income is ordinary income, states the IRS. Qualified dividends are reported to tax filers in Box 1b on Form 1099-DIV. Only dividend payments over $10 are reported on Form 1099-DIV, but tax filers must report all taxable dividends. Qualified dividend tax rates vary depending on the tax status of the filer. As of 2015, the qualified dividend tax is zero for filers with incomes in the 10 or 15 percent brackets, while the rate levied is 15 percent for filers in the brackets between 15 and 39.6 percent, and 20 percent for those in the 39.6 percent bracket.

U.S. corporations that issue common stock pay qualified dividends on those shares and on some preferred stock shares, states Wells Fargo Advisors. Some foreign corporations that operate in U.S. possessions or have treaties with the United States also pay qualified dividends. Investors must hold their stock for a minimum period of time - 60 days for common stock and 90 days for preferred stock - to enjoy special tax status on the dividends those investments yield.

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