Tax on Ordinary Dividends
What are ordinary dividends?
Ordinary dividends are the most common type of distribution from a corporation. Ordinary
dividends are paid out of the earnings and profits of a corporation and are ordinary income to the taxpayer. This
means ordinary dividends are not capital gains.
Are ordinary dividends taxable?
Ordinary dividends are taxable dividends.
How to report ordinary dividends?
Ordinary dividends are reported on tax Form 1099 DIV box 1a.
If the total of all interest or the total or all dividends (ordinary dividends and other types
of dividends) is more than $1,500, all interest and all dividends received would be reported on Schedule B Part I
for interest income and Schedule B Part II for dividend income and attached to the 1040 tax form. Schedule B Part II is labeled Ordinary dividends.
How are ordinary dividends of mutual funds taxed by IRS?
Ordinary dividends of mutual funds are added to taxable income on the tax form 1040 and
taxed at the income tax rate of the taxpayer.
What are qualified dividends? How to report qualified dividends?
Qualified dividends are ordinary dividends that are subject to the same 5% or 15% maximum tax
rate that applies to net capital gain. Qualified dividends should be shown in box 1b of the form 1099 DIV.