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Ruth and Steve received a 1099 Div for 2019. Their taxable income from wages was $86,500....

Ruth and Steve received a 1099 Div for 2019. Their taxable income from wages was $86,500. Their 1099 Div revealed Box Ordinary Dividends as $1000, and

qualified dividends as $1000 in Box 2. How much tax will they pay on dividend income?.

A $150

B $ 200

C $220

D $300

Thank you.

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Answer #1

As of this writing, qualified dividends are taxed as long-term capital gains. This means that if your highest income tax bracket is 15% or less, you receive these dividends tax-free. If your marginal rate of tax is higher than 15%, your qualified dividends are taxed at 15% or 20%, depending on your income

When your mutual fund makes a distribution of its investment earnings to you and reports it in box 2a of Form 1099-DIV, the IRS generally allows you to treat the distribution like a long-term capital gain. This is beneficial since the same tax rules that apply to your qualified dividends also apply to mutual fund capital gain distributions, regardless of whether you hold the investment for 10 days or 10 years.

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