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Why do I pay capital gains tax if dividends are reinvested

 
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1 Reply
JohnW152
Expert Alumni

Why do I pay capital gains tax if dividends are reinvested

When you elect to not receive dividend payments, but instead choose to apply the earnings to purchase additional shares, you receive a benefit from the payout, even if you aren't actually receiving the payments. 

 

This benefit is taxable to you, even though you didn’t actually receive the payments.

 

And, dividends you receive on securities you’ve owned for longer than a year are treated as qualified dividends, and therefore are taxed at a lower capital gain tax rate.

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