Is Dividend Income Taxable? (2024)

In most cases, dividend income is taxable. Taxpayers will often receive a Form 1099-DIV for all dividends in excess of $10 or more earned from any single entity. In addition, taxpayers must report this income on Schedule B of their Federal tax return if they've received over $1,500. Qualified dividends are also subject to their own tax table which topped out at 20% for 2022.

Some investment vehicles that issue dividends are exempt from taxes, as some mutual funds or other regulated investments may hold municipal or tax-exempt securities that yield nontaxable dividends. In addition, the lowest tier for the qualified dividend tax table assesses a 0% tax on individuals with lower income.

Key Takeaways

  • The tax rate for dividends depends on whether they are qualified or nonqualified.
  • Qualified dividends, which include those paid by U.S. companies, are taxed the long-term capital gains rate.
  • Nonqualified, or ordinary, dividends, such as those paid by real estate investment trusts (REITs), are taxed at the regular income rate.
  • Taxpayers will receive a Form 1099-DIV for dividends above $10. This form is also sent to the IRS on the taxpayer's behalf.
  • Taxpayers may need to complete Schedule B to support Form 1040 if they earn a certain amount of dividends.

A qualified dividend is taxed at the lower long-term capital gains tax rate instead of at the higher tax rate used on an individual’s regular income. To be eligible for this special tax rate, a dividend must be paid by one of the following:

  • A U.S. company
  • A company in U.S. possession
  • A foreign company residing in a country that is eligible for benefits under a U.S. tax treaty
  • A foreign company’s stock that can be easily traded on a major U.S. stock market

These dividends must also meet holding period requirements. The stock must have been held in excess of 60 days during the 121-day period beginning 60 days before the ex-dividend date. In the case of preferred stock, the stock must have been held in excess of 90 days during the 181-day period beginning 90 days before the ex-dividend date if the dividends are due in a period of time longer than 366 days.

Note that if a taxpayer's taxable income is low enough, qualified dividend income is assessed a marginal tax rate of 0%.

Qualified Dividend Taxes

The amount of tax paid on qualified dividends depends on the taxpayer's filing status and taxable income. Below certain threshold, qualified dividend income is tax-free, and qualified dividend income is assessed at the highest 20% rate to those who exceed the highest income thresholds below.

The breakdown of taxes on qualified dividends for 2022 and 2023 is below. The figures are calculated using the Qualified Dividends and Capital Gain Tax Worksheet contained within the instructions for Form 1040 in addition to inflation-adjusted wage brackets for 2023.

Dividend Tax Rate, 2022
Filing Status0% Tax Rate15% Tax Rate20% Tax Rate
Single$0 to $41,675$41,676 to $459,750$459,751 or more
Married Filing Jointly$0 to $83,350$83,351 to $517,200$517,201 or more
Married Filing Separately$0 to $41,675$41,676 to $258,600$258,601 or more
Head of Household$0 to $55,800$55,801 to $488,500$488,501 or more
Dividend Tax Rate, 2023
Filing Status0% Tax Rate15% Tax Rate20% Tax Rate
Single$0 to $44,625$44,626 to $492,300$492,301 or more
Married Filing Jointly$0 to $89,250$89,251 to $553,850$553,851 or more
Married Filing Separately$0 to $44,625$44,626 to $276,900$276,901 or more
Head of Household$0 to $59,750$59,751 to $523,050$523,051 or more

Meanwhile, there are nonqualified, or ordinary, dividends. These dividends do not meet the qualified dividend requirements and are treated as short-term capital gains. These nonqualified dividends are taxed at the same rates as an individual's regular income. Thus, in the chart above, nonqualified dividends are taxed at the "Tax Rate on Regular Income."

How Much Do You Pay in Taxes for Dividends?

The ultimate tax rate a taxpayer pays on dividends depends on the taxpayer's taxable income (and associated marginal tax rate) in addition to the type of dividend received. Qualifying dividends are assessed their own rate up to a maximum rate of 20%, though some of these dividends may be taxed at a marginal rate as low as 0%.

How Do I Avoid Paying Taxes on Dividends?

There's several strategies taxpayers can employ to avoid paying taxes on dividends. Taxpayers would do well to stay in lower tax brackets (for tax reasons). In addition, there are many types of investments that offer tax-exempt bonds. Last, investors may leverage tax-exempt accounts or tax-deferred accounts to at least temporarily defer when taxes need to be paid.

Do I Get Taxed on Dividends If I Reinvest Them?

It depends. Certain types of tax-advantaged accounts such as a 401(k) or IRA are not taxable unless a nonqualifying distribution is taken or if taxable funds are distributed at retirement. Other types of dividends aren't taxed when they are earned. For example, many government-issued securities offer tax exemption status. If dividends are claimed as ordinary income, then reinvested, you must claim them as dividend income. The dividends earned are valued at their fair market value at the time of the award.

The Bottom Line

Many investors seek additional cash flow by investing in dividend-issuing securities. Some securities are tax-exempt, while other types of dividends held within certain retirement accounts is non-taxable. However, qualified dividends are taxed at a rate based on a taxpayer's marginal income rates. Qualified dividends can be taxed at a rate up to 20%, and a taxpayer may need to fill out additional tax schedules to support the income.

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy.

  1. Internal Revenue Service. "Instructions for Form 1099-DIV," Page 1.

  2. Internal Revenue Service. "1040, Qualified Dividends."

  3. Internal Revenue Service. "Topic No. 409 Capital Gains and Losses."

  4. Internal Revenue Service. "Topic No. 404, Dividends."

  5. Internal Revenue Service. "1040, Ordinary Dividends."

  6. Internal Revenue Service. "Publication 550 (2022), Investment Income and Expenses."

  7. Internal Revenue Service. "Topic No. 404, Dividends."

  8. Internal Revenue Service. "Publication 550," Page 19.

  9. Internal Revenue Service. "Form 1040, 2022 Instructions," Page 36.

  10. Internal Revenue Service. "Rev. Proc. 2022-38."

Compare Accounts


The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.




Is Dividend Income Taxable? (2024)
Top Articles
Latest Posts
Article information

Author: Lidia Grady

Last Updated:

Views: 5235

Rating: 4.4 / 5 (45 voted)

Reviews: 84% of readers found this page helpful

Author information

Name: Lidia Grady

Birthday: 1992-01-22

Address: Suite 493 356 Dale Fall, New Wanda, RI 52485

Phone: +29914464387516

Job: Customer Engineer

Hobby: Cryptography, Writing, Dowsing, Stand-up comedy, Calligraphy, Web surfing, Ghost hunting

Introduction: My name is Lidia Grady, I am a thankful, fine, glamorous, lucky, lively, pleasant, shiny person who loves writing and wants to share my knowledge and understanding with you.