does turbotax applies higher tax rate for dividend?

[asm_ahsan]

I am filing married jointly. based on my household income, I supposed to pay 15% tax for my dividend income but turbo tax charging more. e.g. before entering dividend income I have a refund $3771. But after entering $4721.51dividend refund comes down to $2883. That means. for $4721.51 ordinary & qualified dividend total tax is $888 which is 19%. what am I missing here? any help is appreciated.

[pk]

@asm_ahsan  absent your sharing your AGI ( before  and after adding dividend income ) your filing status, all one can do is guess --- you were probably sitting close to the edge of a  tax bracket and the dividend income just put your marginal rate higher.  Take a look at your  form 1040   worksheet  ( in the forms mode ) and  calculate the tax by hand from the tax tables  ( Pub 17 or instructions for form 1040 ).

Why do you say dividend  in come should be taxed at 15% ?   Is this foreign dividend  or what ?.

Sorry , this is probably not  the answer you expected  , but  with your post as the only data point, we are kind of blind.

[asm_ahsan]

My household AGI is 290k. I am seeing (I goggled) that for married filing jointly if income is between $94,055 – $583,750 then dividend tax rate is 15%. Our AGI is far below the upper limit. am I missing something. Thanks for your prompt response & time. Really appreciated.

[asm_ahsan]

I am talking about 2024 tax year

[VolvoGirl]

When you enter one taxable transaction, you can't just watch the monitor.  You increased your overall adjusted gross income and with that come many other changes in your return, not just the incremental tax on the one transaction.

Like for example it increased your AGI and that would decrease some deductions if you itemized on Schedule A.  And by increasing your AGI it might reduce some credits you were getting like EIC.  And can make more of any Social Security taxable.

You would have to compare both returns line by line before and after you entered the income to see all the changes.

Even though the full amount shows up as income on the 1040 as income, if you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from schedule D.  The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet.  It does not get filed with your return.  In the online version you need to save your return as a pdf file and include all worksheets to see it.

[pk]

@asm_ahsan  agreeing with my colleague @VolvoGirl , the figures you are quoting are for Qualified Dividend not ordinary dividend  ( which would be per your marginal tax bracket ).

Is this what you meant ?  See here:  from -->  Is There a Dividend Tax? Your Guide to Taxes on Dividends - TurboTax Tax Tips & Videos

What are the 2024 tax rates for dividends in different tax brackets?

Ordinary dividends are taxed using the ordinary income tax brackets for tax year 2024

Qualified dividend taxes are usually calculated using the capital gains tax rates. For 2024, qualified dividends may be taxed at 0% if your taxable income falls below:

• $47,025 for those filing Single or Married Filing Separately
• $63,000 for Head of Household filers
• $94,050 for Married Filing Jointly or Qualifying Surviving Spouse filing status

The qualified dividend tax rate increases to 15% for taxable income:

• $47,026 through $518,900 for Single Filers
• $47,026 through $291,850 for Married Filing Separately filers
• $63,001 through $551,350 for Head of Household filers
• $94,051 through $583,750 for Married Filing Jointly or Qualifying Surviving Spouse filers

Qualified dividend income above the upper limits of the 15% bracket requires paying a 20% tax rate on any remaining qualified dividend income. Depending on your specific tax situation, qualified dividends may also be subject to the 3.8% Net Investment Income Tax.

[LoriC]

I am having the same problem, not related to higher agi or anything, our dividend should be taxed at 15% but when entered as qualified into TT, our tax calculator adjusted at our current tax rate, not 15%.  Any help on how to correct this would be appreciated.

[asm_ahsan]

I am seeing higher tax on dividend due to net investment tax (15% + 3.8% )due to higher AGI compared to statutory threshold which is 250k

[pk]

@LoriC , so you are saying that qualified dividends are being taxed  as  ordinary dividends.  Please can you provide some numbers   ( just no PI I-- Personally Identifiable Information) . This will let me simulate  the situation and see  what Turbo thinks it is doing --please 

pk

[baldietax]

@LoriC if you are on desktop go to Forms mode at find the "Qualified Dividends and Capital Gain Tax Worksheet" (not sure equivalent for TT Online but should be in the PDF with all forms and worksheets).  This does the calcs for long term cap gains / qualified dividends.

TT core calcs are solid, tbh it's unlikely the qualified dividend is being taxed incorrectly.  If you are looking at overall amount due to the Fed as you input the qualified dividends it may reflect a higher rate due to other effects of changing your AGI, also this amount on desktop includes any underpayment penalty, so if you see the total changing you need to look at the effects on your 1040 line by line to see what is driving it.

That said there have been some oddities with 1099s especially due to import so another thing to try is to delete the 1099 and re-input and see if you get the same outcome.