Taxes on Dividends: Answers to 4 Key Questions

Dividends are one of my favorite things to collect.

Even John D. Rockefeller understood the power of dividends.

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

He has been quoted as saying,

1.  Why do Investors Love Dividends So Much?

There are several reasons investors like dividends.

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.

Alternatively, you can purchase shares of a different company.

You can reinvest the money and buy additional shares of the same company.

Dividend tax rates differ depending on whether the dividend is qualified or nonqualified.

2.  What is the Tax Rate on Dividends?

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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