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Interest and Dividends

Below are interest and dividends explained for tax filing purposes. Interest and dividends are reported on the tax form 1040 on the lines just after wages, salaries, and tips.

Why are interest and dividends unearned income?

Interest and dividends are common types of income. Interest and dividends are considered "unearned income" because money, and not a person, is working to earn the income.

Are interest and dividends taxable?

Most types of interest and dividends are taxable. Generally any interest and dividend amounts over $10 are reported to you and to the IRS on the tax form 1099. Only interest and dividends from special types of investments such as municipal bonds are tax exempt.

If I receive very small interest or dividends, do I have to report them on my tax return?

Some taxpayers think that small amounts of interest such as from a saving account don't need to be reported. This is not true, all taxable interest and dividends must be reported on your tax return regardless of the amount or whether or not you received a Form 1099.

How are interest income reported?

Interest received is usually reported on the Form 1099-INT, Interest Income.

How are dividends reported?

Dividends are reported on Form 1099-DIV, Dividends and Distributions.

When must Schedule B be used to report interest or dividends?

If your total interest or total dividends are over $1,500 then Schedule B, Interest and Ordinary Dividends, must be used to report these amounts.


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