Investing in dividend-paying stocks offers dozens of advantages. One of those advantages shows up when it comes time to file your taxes. In many cases, dividends are taxed at a lower rate than ordinary income. The MarketBeat dividend tax calculator lets you quickly and easily see the tax liability for the regular dividend payments you receive.
Although the dividend tax calculator is beneficial at tax time, it’s a tool you can use anytime. For example, you can use it when deciding between two dividend stocks to add to your portfolio.
Outside of a tax-advantaged account such as a 401(k), you must report the passive income you receive from dividends on your taxes. You can avoid getting hit with a nasty surprise when you file your taxes by using MarketBeat’s dividend tax calculator.
Step 1: Identify qualified vs. nonqualified dividends
Most dividends are qualified dividends. To know for sure, you can look at Form 1099-DIV, which you'll receive from each company that you receive dividends of more than $10 per calendar year. Even if you do not receive a Form 1099 or a Schedule K-1, you are responsible for reporting all taxable dividends on your tax return.
Dividend tax rates differ depending on whether your dividends are qualified or nonqualified. The qualified dividend tax rate is the same as the current long-term capital gain rate. Nonqualified dividends are taxed at ordinary income tax rates. However, you should note that many nonqualified dividends come from companies with business models requiring them to pay a high percentage of their earnings as dividends. The size of the dividend may offset the fact that it will be taxed as ordinary income. Talk to your tax advisor to learn more.
Qualified dividends must meet specific criteria:
- Dividends must be paid by a U.S. company or a foreign company that gets an advantage from a U.S. tax treaty and meets the other criteria.
- The dividend must not exist under the list of "not qualified dividends."
- You fulfill the requirements for the holding period. For qualified dividends, this means you own the stocks for more than one year.
By contrast, a nonqualified dividend is one listed on the list of "not qualified dividends," or it meets other criteria, including:
- The dividend is paid out by a company that operates as a real estate investment trust (REIT) or master limited partnership (MLP).
- The dividend comes from a foreign company that does not form part of the United States tax treaty or is not listed on a U.S. stock market (e.g., NYSE or NASDAQ).
- The dividend pays out as part of an employee's stock options.
- Some special dividends/one-time dividends are nonqualified.
- The dividend doesn't meet the holding period requirement set by the IRS.
Step 2: Find your qualified dividend tax rate for 2024
The amount that you’ll pay for your dividend tax dues in 2024 will vary depending on how you’re filing your taxes as well as how much taxable income you earned in 2023. Calculate your qualified dividend tax rates for 2024:
- Identify all qualified dividend income using the criteria outlined in the section above. Keep your brokerage statements handy to quickly cross-reference purchase date and dividend income information.
- Add all qualified dividend income together.
- Calculate your total taxable income for 2023 and note how you’ll be filing this year.
- Use the chart below to determine your long-term capital gains tax rate, which is how you’ll pay taxes on income generated from long-term securities you hold.
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0%*
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15%*
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20%*
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Single
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$0 - $44,625
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$44,625 - $492,300
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$492,301 +
|
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Married filing jointly and surviving spouse
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$0 - $89,250
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$89,250 - $553,850
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$553,851 +
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Head of household
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$0 - $59,750
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$59,750 - $523,050
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$523,051 +
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Married filing separately
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$0 - $44,625
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$44,625 - $276,900
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$276,901 +
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Trusts and estates
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$0 - $3,000
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$3,000 - $14,650
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$14,650 +
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* Determine your capital gain bracket by adding your net long-term capital gains and/or qualified dividends to your other taxable income net of deductions.
Step 3: Find your nonqualified dividend tax rate for 2024
Nonqualified dividend income is essentially the same thing as receiving a 1099 tax form equal to the amount that your investments produced. For most taxpayers, it’s advantageous to hold investments for longer periods of time to enjoy qualified dividend rates because this results in a lower effective tax rate. Calculate tax on your nonqualified dividend income:
- Calculate all taxable income for the year; include nonqualified dividend income in this figure.
- Using the chart below, calculate your total income tax due on standard income earned in 2023.
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Filing Status
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Married taxpayer filing jointly/ surviving spouse
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Single
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Head of household
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Married filing separately
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If taxable income* is:
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$0 - $22,000
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$0 - $11,000
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$0 - $15,700
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$0 - $11,000
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Tax is:
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10%
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10%
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10%
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10%
|
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If taxable income* is:
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$22,001 - $89,450
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$11,001 - $44,725
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$15,701 - $59,850
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$11,001 - $44 ,725
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Tax is:
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($2,200 + 12% of excess over $22,000)
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$1,100 + 12% of excess over $11,000
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$1,570 + 12% of excess over $15,700
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$1,100 + 12% of excess over $11,000
|
|
If taxable income* is:
|
$89,451 - $190,750
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$44,726 - $95,375
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$59,851 - $95,350
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$44,726 - $95,375
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|
Tax is:
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($10,294 + 22% of excess over $89,450)
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$5,147 + 22% of excess over $44,725
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$6,868 + 22% of excess over $59,850
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$5,147 + 22% of excess over $44,725
|
|
If taxable income* is:
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$190,751 - $364,200
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$95,376 - $182,100
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$95,351 - $182,100
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$95,376 - $182,100
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Tax is:
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$32,580 + 24% of excess over $190,750
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$16,290 + 24% of excess over $95,375
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$14,678 + 24% of excess over $95,350
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$16,290 + 24% of excess over $95,375
|
|
If taxable income* is:
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$364,200 - $462,500
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$182,101 - $231,250
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$182,101 - $231,250
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$182,101 - $231,250
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|
Tax is:
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$74,208 + 32% of excess over $364,200
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$37,104 + 32% of excess over $182,100
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$35,498 + 32% of excess over $182,100
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$37,104 + 32% of excess over $182,100
|
|
If taxable income* is:
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$462,501 - $693,750
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$231,251 - $578,125
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$231,251 - $578,100
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$231,251 - $346,875
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|
Tax is:
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$105,664 + 35% of excess over $462,500
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$52,832 + 35% of excess over $231,250
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$51,226 + 35% of excess over $231,250
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$52,832 + 35% of excess over $231,250
|
|
If taxable income* is:
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$693,751 or more
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$578,126 or more
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$578,101 or more
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$346,876 or more
|
|
Tax is:
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$186,601.50 + 37% of excess over $693,750
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$174,238.25 + 37% of excess over $578,125
|
$172,623.50 + 37% of excess over $578,100
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$93,300.75 + 37% of excess over $346,875
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* Taxable income is income after all deductions (including either itemized or standard deductions).
Step 4: Calculate dividend tax rates
To use the dividend tax calculator:
- Enter the amount of your qualified and nonqualified dividends. If you don’t yet own the stock, you can estimate the amount of the dividend you’ll receive. Go to the profile page for that stock on MarketBeat.com and click on the “Dividend” tab. You’ll see the current annual payout per share. If you plan to hold the stock for a year, you can multiply that number by the number of shares you plan to own.
- If your income comes from a qualified dividend, enter your capital gains tax rate (see chart above). If you have no income from qualified dividends, put “0” in the “Qualified Dividend Income” field.
- If your income comes from a nonqualified dividend, enter your ordinary (i.e., marginal) income tax rate (see chart above). If you have no income that comes from nonqualified dividends, put “0” in the “Nonqualified Dividend Income” field.
