Solved: If my tax bracket is over 15% tax bracket, will I be paying the 15% tax on whole amount of qualified dividends?
cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
New Member

If my tax bracket is over 15% tax bracket, will I be paying the 15% tax on whole amount of qualified dividends?

I make about $13,500 in dividends from Mutual funds I own. If I am over the 15% tax bracket by about $2,000, do I have to pay the whole 15% tax on the $13,500 dividend income? Or is it prorated and I pay 15% on the $2,000 and the rest gets taxed at 0%?

1 Best answer

Accepted Solutions
Highlighted
Level 15

If my tax bracket is over 15% tax bracket, will I be paying the 15% tax on whole amount of qualified dividends?

 You pay 15% on the $2,000 and the rest gets taxed at 0%. The calculations will show on the "Qualified dividends and capital gains" worksheet, which is not sent to the IRS

View solution in original post

5 Replies
Highlighted
Level 15

If my tax bracket is over 15% tax bracket, will I be paying the 15% tax on whole amount of qualified dividends?

 You pay 15% on the $2,000 and the rest gets taxed at 0%. The calculations will show on the "Qualified dividends and capital gains" worksheet, which is not sent to the IRS

View solution in original post

Highlighted
New Member

If my tax bracket is over 15% tax bracket, will I be paying the 15% tax on whole amount of qualified dividends?

So does the dividend income gets calculated as gross income first? If let's say my annual salary is $70,000, and my dividend income is $13,500, my total gross income would be $83,500 before deductions & exemptions?
Highlighted
Level 15

If my tax bracket is over 15% tax bracket, will I be paying the 15% tax on whole amount of qualified dividends?

Yes. The all the dividend income is included in your gross income ($83,500 in your example), your adjusted gross income and your taxable income (line 43 of form 1040 or line 27 of form 1040A).
Because you have Qualified dividends (and/or long term capital gains), you cannot just look up your taxable income in the tax table, to determine your tax. You must use the Qualified dividends and capital gains worksheet
Highlighted
New Member

If my tax bracket is over 15% tax bracket, will I be paying the 15% tax on whole amount of qualified dividends?

Thank you for the quick response. One more question, the mutual funds I currently own pays monthly dividends which gets re-invested into the funds. Do I have to hold them for a certain amount of period before it becomes the qualified dividends?
Highlighted
Level 15

If my tax bracket is over 15% tax bracket, will I be paying the 15% tax on whole amount of qualified dividends?

Theoretically, yes. But you don't bother with it. You report as Qualified Dividends whatever your mutual fund company reports in box 1b of form 1099-Div.  In other words, you assume your MF company has done it correctly
Privacy Settings