Taxes on Dividends: Answers to 4 Key Questions
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Dividends are one of my favorite things to collect.
Even John D. Rockefeller understood the power of dividends.
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“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
He has been quoted as saying,
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1.
Why do Investors Love Dividends So Much?
There are several reasons investors like dividends.
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One of the most important is that dividends are a return of cash to an investor.
A company can return some money to stock owners by buying back shares or paying a dividend.
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Alternatively, you can purchase shares of a different company.
You can reinvest the money and buy additional shares of the same company.
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Dividend tax rates differ depending on whether the dividend is qualified or nonqualified.
2.
What is the Tax Rate on Dividends?
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The difference in the tax rate can be dramatic depending on your income.
Families in the highest income tax bracket pay a 37% tax rate on regular income and only a 20% tax rate on dividends.
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