Dividends can be a great way to earn passive income from your investments, but understanding how they’re taxed is essential to making the most of them. Whether you’re reinvesting your dividends or using them as a source of income, taxes can impact your overall returns.
In this guide, we’ll break down how dividends are taxed, the differences between qualified and ordinary dividends, and what it means for your tax bracket. By the end, you’ll have a clear understanding of what to expect at tax time and how to plan your investments more effectively.
What is the dividend tax rate?
When you become a stakeholder in a company, you receive a percentage of that company’s profit. These distributions are called dividends. As a shareholder, you must pay taxes on these dividends, but the tax rate on your dividends will depend on how those earnings are classified.
Different types of dividends are taxed at different rates. For 2026, qualified dividends are taxed at long‑term capital gains rates of 0%, 15% or 20%, while nonqualified dividends are taxed at ordinary income tax rates ranging from 10% to 37%, depending on your taxable income and filing status
In the United States, the IRS categorizes dividend into two types: qualified dividends and nonqualified (ordinary) dividends. These categories differ primarily in their tax treatment and the requirements they must meet. Here’s a closer look at both:
What are qualified dividends?
Qualified dividends are taxed at the same rates as long-term capital gains rates (0%, 15%, or 20%), depending on your taxable income and filing status. To be considered qualified, dividends must meet the following criteria:
- Issuer requirement: Must be paid by a U.S. corporation or a qualified foreign corporation listed on major exchanges like the Dow Jones or Nasdaq.
- Holding period: You hold the stock for more than 60 days (at least 61 days) during the 121‑day period that begins 60 days before the ex‑dividend date; similar but longer rules can apply to some preferred stock.
What are nonqualified (ordinary) dividends?
Nonqualified dividends, often referred to as ordinary dividends, do not meet the IRS requirements to be classified as qualified. They are taxed at ordinary income tax rates, which for 2026 range from 10% to 37%, depending on your income and filing status.
Examples of dividends that do not qualify
Some dividends are automatically classified as nonqualified because of the following:
- Dividends paid by tax-exempt organizations.
- Dividends from real estate investment trusts (REITs).
- Dividends issued by foreign corporations that do not meet the IRS’s qualifications.
- Most distributions from common and preferred stocks do not meet the holding period requirements.
However, for tax purposes, investors face an advantage when they make money from qualified dividends: the qualified dividend tax rate is lower compared to the ordinary dividend tax rate.
How are dividends taxed?
Dividends are taxed based on their classification and your income tax bracket.
- Qualified dividends: Taxed at long-term capital gains rates (0%, 15%, or 20%).
- Nonqualified dividends: Taxed at ordinary income tax rates (10% to 37%).
If you’re a high-income earner, an additional 3.8% Net Investment Income Tax (NIIT) may apply to dividend income. This tax applies if your modified adjusted gross income (MAGI) exceeds $200,000 for single filers or heads of household, $250,000 for married couples filing jointly, or $125,000 for married individuals filing separately
Tax rates for qualified and ordinary dividends
For taxpayers, the split between qualified and ordinary dividends means there are two different possible tax rates on dividend income.
Ordinary dividends
- Taxation: Ordinary dividends are taxed at your ordinary income tax rate.
- Rate range: The specific rate varies based on your tax bracket and filing status, ranging from 10% to 37%.
- Details: These dividends are treated the same as most other forms of taxable income.
Qualified dividends
- Taxation: Qualified dividends are taxed at the same rate as long-term capital gains, which for 2026 are 0%, 15%, or 20%, depending on your taxable income and filing status (rather than saying they “often result in a lower tax rate”)
- Rate range: The tax rate depends on your tax bracket and filing status:
- 0%, 15%, or 20% for most taxpayers.
- An additional 3.8% tax applies to high-income earners on their investment income, including qualified dividends, if their modified adjusted gross income exceeds 200,000 USD for single filers or heads of household, 250,000 USD for married couples filing jointly, or 125,000 USD for married filing separately.
Optimizing your portfolio
If you hold investments across multiple brokerages, using a single platform may make it easier to view all of your dividend‑paying positions and see which dividends are qualified or ordinary.
Public provides tools to transfer eligible securities into one account without selling them, which may help you review your holdings and related tax reporting in a single place.
2025 dividend tax rates
Qualified dividends were subject to slightly adjusted brackets due to inflation:
- 0%: Single filers with taxable income up to $48,350 and married couples filing jointly up to $96,700.
- 15%: Single filers earning $48,351–$533,400 and joint filers earning $96,701–$600,050.
- 20%: For incomes exceeding $533,400 (single) and $600,050 (joint).
Nonqualified dividends remain taxed as ordinary income. For both years, short-term capital gains (dividends from shares held less than 60 days) also follow these higher rates.
2026 dividend tax rates
Qualified dividends continue to be taxed using the long-term capital gains brackets:
- 0%: Single filers with taxable income up to $49,450 and married couples filing jointly up to $98,900.
- 15%: Single filers earning $49,451–$545,500 and joint filers earning $98,901–$613,700.
- 20%: For incomes exceeding $545,500 (single) and $613,700 (joint).
Nonqualified dividends in 2026 are still taxed as ordinary income at your regular federal tax bracket, which remains in the 10%–37% range.
How to report dividend income on your taxes?
To report dividend income on your taxes, you’ll need to follow these steps:
- Collect your Form 1099-DIV: This form shows the total dividends earned and whether they’re qualified or ordinary.
- Report on your tax return: Use Schedule B if your total taxable interest and ordinary dividends exceed 1,500 USD or if certain foreign‑account reporting rules apply, or report them directly on Form 1040
- Classify the dividends: Determine if they are “qualified” (taxed at lower rates) or “ordinary” (taxed at regular income rates).
- Include foreign dividends: If applicable, report any foreign dividends and consider whether you are eligible to claim a foreign tax credit using Form 1116 for foreign taxes withheld
You may use tax software or consult a tax professional, which might help simplify this process if you’re unsure.
The bottom line
Dividends are a potential component of long‑term investing, but they are taxed like other forms of investment income under current U.S. tax law.
If you prefer to manage your investments on a single platform, Public offers a platform that lets you build a multi-asset portfolio, including stocks, options, bonds, and more. With tools like the Income Hub to track earnings from your dividend-paying assets and Alpha, an AI-powered assistant, you can monitor your portfolio and stay informed about your holdings
Sign up on Public.com to get started managing your investments on the platform.
Frequently asked questions
What income is taxable for dividends?
All dividends are taxable, though the rate depends on the type of dividend as well as your tax bracket and filing status. Dividends earned in tax-deferred accounts such as IRAs are not treated as taxable income, but you may be taxed when you make withdrawals from those accounts depending on your circumstances.
Are dividends taxed twice?
Dividends are taxed either at the capital gains rate or at your ordinary income tax rate.
Is the dividend tax rate always the same?
No, the dividend tax rate depends on whether your dividends are qualified or non-qualified, as well as your taxable income, filing status, and the type of account in which you hold the investment.
Do I owe taxes on dividends?
Not all investments generate dividends, even if they are in major U.S. corporations. If you receive 10 USD or more in dividends or certain other distributions from a payer in a tax year, the payer is generally required to issue you a Form 1099‑DIV that reports this income, but you may have taxable dividend income even if you do not receive a form.
What is the reporting requirement for dividend income?
If your total dividends exceed $1,500, you must report them on the Schedule B form of your tax return. You’ll then pay taxes on the dividends, classified as either qualified or ordinary dividends.
