Why my dividend is taxed at a rate of 40%?

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.

Also nearly all of your dividends are nonqualified and those are taxed on your income, up to 37%.

thanks for your reply. before entering the dividend, my AGI is already over the 37% bracket, I didn't have any deduction yet. And hence I was expecting at most 37% tax rate on the dividend, not 40%, if that makes sense?

there is the Net Investment Income Tax of 3.8% when your investment income gets too high. see form 8960