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

[achung0315]

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%?

[Hal_Al · Accepted solution]

 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

[achung0315]

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?

[Hal_Al]

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

[achung0315]

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?

[Hal_Al]

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