Question

. what are dividends and how are qualified dividends taxed differently from nonqualified dividends? 27. Dividend Income. (Obj. 4) Susan owns shares of stock in a corporation. In January 2020, she received a 1099-DIV reporting the following for 2019: Total ordinary dividends Qualified dividends included in total dividends $526 450 How are these dividends reported on Susan's tax return? r (SSN 842-11-6940), age 10, received taxable interest of $4,

please use 2019 tax law

Answer 1

Qualified dividends are those that are taxed at capital-gains rates, which compared  to income-tax rates are lower . To qualify, as qualified dividends they must be generated by stocks issued by U.S.-based corporations or foreign corporations that trade on major U.S. stock exchanges. If as per your ordinary income tax bracket if your paying:

• 10% to 15%, your tax on qualified dividends is zero.
• More than 15% to less than 37%, qualified dividends are taxed at 15%.
• For the top 37% tax bracket, qualified dividends are taxed at 20%.

Investors at the 25% rate or higher save the most on qualified-dividend taxes.

Ordinary dividends are those that do not meet the above criteria. Investors pay tax on these dividends at their ordinary income-tax rates. As of 2019, tax rates range from 10% to 37%.

Susan should report the above dividends as follows:

Ordinary Dividends - $526 {under Form 1040 Page 1 UNDER Regularly Taxed Income (salary, interest, regularly-taxed dividends, short-term capital gains)}

Qualified Dividend - $ 450 under Form 1040 Page 1 under Qualified Dividends and Long Term Capital Gains: