It depends. If your income levels and dividend amounts are nearly identical between 2024 and 2025, but you saw an adjustment in 2025 that wasn't there in 2024, it could be because of:
- If in 2024 you had capital losses (from selling stocks at a loss) that offset your dividends, your "net" amount might have dropped below the $20,000 threshold.
- If in 2025 you don't have those same losses to offset the gains, the full $20,379 becomes "exposed" to the adjustment rule.
- You may have crossed an income threshold barrier in 2025. f your income increased even slightly (e.g., a small raise, more interest income, or a capital gain), you might have landed in a higher tax bracket. Even if your foreign dividends stayed at $20,379, crossing that income threshold (e.g., moving from the 24% bracket into the 32% bracket) forces the IRS to "weight" your foreign income differently to account for the tax savings you get on those dividends. I
- Because of the changes in the One Big Beautiful Bill Act, your income may have been taxed in a different tax bracket in 2024.
- Your total qualified dividends (Foreign + U.S. combined) were $20,000 or less, you were exempt from the adjustment regardless of your income.
- In 2024: If your total qualified dividends were $19,999, you did not adjust. If this is the case, did you have other foreign income that brought the income level to $20,379?
These are some possible reasons why this may have occurred. As for the IRS difference, the IRS uses 37.1% instead of the standard 37% top marginal bracket because of inflation indexing and the specific formula for the "rate differential." The income brackets were established in the One Big Beautiful Bill Act as base rates, but mentioned they were indexed for inflation. The IRS has not caught up to revising the change.
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