Questions about dividend tax.

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vu8
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Questions about dividend tax.

Post by vu8 » Mon Aug 06, 2018 10:40 am

Hi there, I know that the 0 dividend tax applies for up to around 38000 dollars a year of income, then it's 15 percent for up to around 420,000 a year right?
So say, my earned income is 30000 dollars a year, but I receive 100,000 a year in dividends, does that mean that I pay no capital gain tax on all these dividends if they are qualified dividends?
In other word, does dividend count as a part of your taxable income?

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JoMoney
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Re: Questions about dividend tax.

Post by JoMoney » Mon Aug 06, 2018 10:53 am

The dividends count as part of your taxable income, and the amount over $38,700 (assuming single filer) will be at the higher rate. Don't forget you'll likely also have some deductions (like standard deduction of $12,000 in 2018).
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BL
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Re: Questions about dividend tax.

Post by BL » Mon Aug 06, 2018 10:56 am

vu8 wrote:
Mon Aug 06, 2018 10:40 am
Hi there, I know that the 0 dividend tax applies for up to around 38000 dollars a year of income, then it's 15 percent for up to around 420,000 a year right?
So say, my earned income is 30000 dollars a year, but I receive 100,000 a year in dividends, does that mean that I pay no capital gain tax on all these dividends if they are qualified dividends?
In other word, does dividend count as a part of your taxable income? Yes.

jebmke
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Re: Questions about dividend tax.

Post by jebmke » Mon Aug 06, 2018 10:58 am

The zero bracket breaks at $38,600 (single) and $77,200 (MFJ) if I recall correctly. They are slightly out of line with the top of the 12% ordinary bracket.
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Boglegrappler
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Re: Questions about dividend tax.

Post by Boglegrappler » Mon Aug 06, 2018 12:09 pm

Use the dinkytown tax calculator to play around with hypothetical incomes. It will help you understand how the dividends are taxed and how that interacts with other income. The journalists who report these things aren't all that good at illuminating how things actually work.

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Earl Lemongrab
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Re: Questions about dividend tax.

Post by Earl Lemongrab » Tue Aug 07, 2018 12:57 pm

Qualified dividends and long-term capital gains "float" on top of ordinary income. In my situation, I'm in the 12% income tax bracket, and I have more than enough dividends to fill up the remaining space. So I'm in an effective 27% marginal bracket because each dollar of new ordinary income is taxed at 12% AND pushes a dollar of dividends up into the 15% bracket.
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MotoTrojan
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Re: Questions about dividend tax.

Post by MotoTrojan » Tue Aug 07, 2018 12:59 pm

Not all dividends are qualified, including many (all?) bond funds, REITs, etc... Non-qualified dividends count as regular income so you'll be taxed more than your long-term capital gains rate.

Many equity funds are primarily qualified though. Vanguard's Large-Cap Fund is/has-been 100% qualified.

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