Taxes on Dividends: Answers to 4 Key Questions

Dividends are one of my favorite things to collect. Even John D. Rockefeller understood the power of dividends.

In the U.S., though, dividends can have  favorable tax treatment for many small investors, making them tax  efficient in regular brokerage accounts.

It is also possible for dividend-paying stocks to be held in tax-advantaged accounts delaying or reducing federal income tax on dividends.

There are several reasons investors like  dividends. One of the most important is that dividends are a return of  cash to an investor.

Why do Investors Love Dividends So Much?

Dividend tax rates differ depending on whether the dividend is qualified or non-qualified, also known as ordinary.

What is the Tax Rate on Dividends?

In general, the answer is no, but there are exceptions. Dividends are a type of income, so they are taxable.

Can You Avoid Taxes on Dividends?

Owning a retirement account is an advantage and a legitimate way to defer or avoid taxes on dividends.

What About Tax-Advantaged Accounts?

Taxes on dividends can quickly be a  complicated subject. The reason being is that there are variations of  regular cash dividends.

Final Thoughts on Taxes on Dividends

Qualified dividends are tax-efficient and require an investor to hold onto a stock for a longer-term.

Final Thoughts on Taxes on Dividends

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