Find Out Your U.S. Dividend Tax Rate
Dividends are the most common type of distribution from a corporation. They are paid out of the earnings and profits of the corporation. Dividends can be classified either as ordinary or qualified. Whereas nonqualified dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates. The payer of the dividend is required to correctly identify each type and amount of dividend for you when reporting them on Form 1099-DIV for tax purposes. The payee should receive a Form 1099-DIV, Dividends and Distribution, from each payer for distribution of at least $10. The 1099-DIV indicates what you were paid and whether the dividends were qualified or nonqualified.
Qualified dividends come with the tax advantage of a lower tax rate. Three things usually determine whether a dividend is qualified:
- The dividend must have been paid by a U.S. company or a qualifying foreign company.
- The dividends are not listed with the IRS as those that do not qualify.
- The required dividend holding period has been met. Typically, common stock investors must hold the shares for more than 60 days during the 121-day period that starts 60 days before the ex-dividend date.
Some types of dividends that are nonqualified, and thus cannot take the tax preference. Dividends paid from money market accounts, such as deposits in savings banks, credit unions or other financial institutions, do not qualify and should be reported as interest income. Dividends paid by real estate investment trusts (REITs), and master limited partnerships (MLPs) are also nonqualified.
The dividend tax rate on qualified dividends is 0%, 15% or 20%, depending on your taxable income and filing status.
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Filing Status
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0% Tax Rate
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15% Tax Rate
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20% Tax Rate
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Single
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US$0 to US$40,000
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US$40,001 to US$441,550
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US$441,451 or more
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Married filing jointly
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US$0 to US$80,000
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US$80,001 to US$496,600
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US$496,601 or more
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Married filing separately
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US$0 to US$40,000
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US$40,001 to US$248,300
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US$248,301 or more
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Head of household
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US$0 to US$53,600
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US$53,601 to US$469,050
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US$469,051 or more
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Reference: https://www.irs.gov/zh-hant/taxtopics/tc404
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