qualified dividends

[tr567]

I am eligible for zero rate treatment for qualified dividends.  When I test the impact of having lower values for qualified dividends, vs those I actually have, by changing the values in the 1099DIV worksheet to zero, my tax owed amount increases.  Why would having zero qualified dividends vs say, $5000 of qualified dividends result in higher taxes owed?

[tagteam]

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@tr567 wrote:

Why would having zero qualified dividends vs say, $5000 of qualified dividends result in higher taxes owed?

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It would be helpful if you could provide additional facts (specifically figures).

I, for one, have been unable to reproduce your results when I make changes on the 1099-DIV Worksheet. 

[NCperson]

If you are leaving the dividends intact at say $5000 but then lowering the qualified dividends to zero, then the $5000 is taxed at the ordinary rate

As suggested by the prior post, more specifics would be appreciated. What is your Adjusted gross income so we can understand the tax bracket . Any credits for children or EIC?

[tr567]

which figures do you need?

[tr567]

No EIC or children

AGI is 49401

My be I dont understand qualified dividends.  From your response that lowering the QD to zero form 5k results in them being taxes at the ordinary rate - if QDs are zero then how would they taxed at all?  Or are QDs a subset of ordinary dividends that essentially reduce the ordinary dividend amount?

[tagteam]

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@tr567 wrote:

which figures do you need?

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As suggested by the post written by @NCperson , AGI and tax credits would be helpful.

Further, it is possible to get spurious results when changing figures back and forth in Forms Mode.

[tagteam · Accepted solution]

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@tr567 wrote:

Or are QDs a subset of ordinary dividends that essentially reduce the ordinary dividend amount?

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I believe that is the source of the confusion; qualified dividends are a subset of ordinary dividends.

For example, it is not possible to have a scenario where ordinary dividends are $5,000 and qualified dividends are $6,000; QDs are always the same or a lesser amount than ordinary dividends.

[NCperson]

on the tax form, line 3b, are all dividends which can come from stocks, mutual funds, ETFs, etc. 

HOWEVER, there are qualified dividends, (line 3a) which are from stocks as well as the stock component of mutual funds and ETFs.  They are taxed at the capital gains rate

so let's say you had $5,000 of dividends and they all came from stock mutual funds and stock ETFs.  line 3b  and line 3a would both have $5,000 and the money would be taxed at the capital gains rate.

but let's alternatively say that of the $5,000 $3,000 came from stock and $2,000 came from bond funds.  Then line 3b would still have $5,000 and line 3a would have $3.000.  The $3,000 would be taxed at the capital gains rate but the remaining $2,000 would be taxed at the ordinary income tax rate.