🇺🇸 United States Dividend Tax Guide
Complete guide to dividend taxation in United States. Qualified Dividends: Taxed at 0%, 15%, or 20% (Long-term Cap Gains rates).
In 60 Seconds
- •Qualified Dividends: Taxed at 0%, 15%, or 20% (Long-term Cap Gains rates)
- •Ordinary Dividends: Taxed at your regular income tax bracket (10-37%)
- •Net Investment Income Tax (NIIT): Extra 3.8% applies if income >$200k/$250k
- •Holding Period: Must hold stock >60 days for qualified status
How Dividend Tax Works
The US tax code distinguishes between "Qualified" and "Ordinary" dividends. Qualified dividends receive preferential tax treatment, capped at 20% for high earners. Ordinary dividends (e.g., from REITs or short-term holdings) are treated as regular income. High-income earners face an additional 3.8% NIIT surtax.
Key Considerations
Example: Real World Scenario
Scenario
You receive $1,000 in qualified dividends. Taxable income is $80,000 (15% cap gains bracket).
Lowering Your Dividend Tax Bill
Meet the 60-Day Rule
Ensure you hold the stock for more than 60 days during the 121-day period around the ex-dividend date to lock in the lower qualified rate.
Asset Location
Place high-yield assets that pay ordinary dividends (like REITs or bonds) in tax-advantaged accounts (IRAs) to avoid high income tax rates.
Tax-Loss Harvesting
Offset realized capital gains with losses to keep your overall Adjusted Gross Income (AGI) lower, potentially avoiding the NIIT threshold.
