10 Things Every Dividend Investor Should Know

3. Tax Benefits of Dividends:

Though tax treatment of dividends largely depends on individual circumstances and tax laws, dividends can offer certain tax benefits to investors. Qualified dividends, which are paid by US corporations and certain foreign companies, are taxed at the long-term capital gains tax rates. This tax is generally lower than the income tax and depends on the individual’s income level and filing status. On the other hand, nonqualified dividends are taxed at the same rate as ordinary income. Moreover, dividend stocks can offer tax advantages when held within retirement accounts such as individual retirement accounts (IRAs) and 401(k) plans.