Tax Rates on Dividends

Tax Rates on Dividends

In many jurisdictions, dividends are taxed at a different rate than other forms of income.

Qualified dividends in the U.S., for instance, are taxed at long-term homeontheweb.org capital gains rates, which are 주식 lower than ordinary income tax rates. However, non-qualified dividends are taxed at the investor’s marginal tax rate, which can be significantly higher.

  1. Example: If an investor falls into the 24% tax bracket, non-qualified dividends will be taxed at 24%, whereas qualified dividends might only be taxed at 15% or 20%, depending on the tax bracket.

Double Taxation

Corporations pay taxes on their earnings, and then investors pay taxes on the dividends received from those after-tax earnings.

This double taxation can erode the overall returns from dividend investments.

  1. Example: A corporation earning $100 in profit might pay $21 in corporate taxes, leaving $79. If it pays out all $79 as dividends, the investor might pay up to 20% in dividend taxes, reducing the net payout to $63.20.

Dividend Cuts and Suspensions

Companies can reduce or suspend their dividend payments, which can negatively impact income-focused investors.