Anonymous
Anonymous asked in Business & FinanceTaxesUnited States · 2 months ago

Do dividends count against your TOTAL income for taxation purposes?

Say I made $55,000/year in earned income. Now, what if I earned $25,000 in dividends that year too (non-IRA). Would that $25,000 get taxed in a way that adds to my total income? So, instead of having to report I earned $55K, I have to say I made $80K (55+25)? And then pay taxes for $80K???

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  • 1 month ago

    They are PART of your  total income. NOTHING counts against your total income.

    Dividends are ordinary income for US income tax purposes, so they are taxed at the same rate as wages.

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  • 2 months ago

    Yes, your total income would then be $80K. However, you would not pay tax for $80K, because some income (typically about $12,000 per person) is not taxed. So you might pay tax on $65,000 to $70,000, for example. Also, "qualified dividends" and long-term capital gains are taxed at a lower rate than other income, so you would not pay the same tax as someone who made $80,000 in earned income at a job.

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  • 2 months ago

    To be clear, you don't just add dividends to your income. They go in boxes 3A & 3B. If you aren't using tax software, you need to read the 1040 instructions carefully and may have complete worksheets and schedules. If you use tax software, you just fill in the blanks from you 1099-DIV

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  • 2 months ago

    probably 25 thousand is a tax-free minimum

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  • 2 months ago

    There are 2 types of dividends, qualified and ordinary. Ordinary is dividend form a stock with higher rates and you report it woth your income. Qualified is taxed at a long term capital gain rate and have lower rates than ordinary l.

    Be sure to click on the links in the source.

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  • 2 months ago

    Yes, all ordinary dividends must be filed as income.

    Capital gains (stock sale) is taxed differently, and you can find more information on that below

    But in your case it's filed as income.

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  • 2 months ago

    For someone earning $55000 a year, it would be difficult to earn $25000 in dividends in a year.  It would mean that you had about $850,000 in stock.

    You would have $55K taxed as ordinary income and $25K taxed as capital gains (likely 20%).

    You would have to say you made $80K because you did make $80K. 

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