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Dividend Tax Calculator

Dividends are a great way to earn extra income, but you will pay taxes on them. Here's a breakdown of the applicable tax rates on this year's dividends. 

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Dividend Tax Formula

Qualified Dividends  x Capital Gains Tax Rate
+ Non-Qualified Dividends  x Ordinary Income Tax Rate

Dividend Taxes

Dividend taxes are calculated by multiplying the qualified dividends by the capital gains tax rate and the non-qualified dividends by the ordinary income tax rate, then adding those amounts together to get the total dividend tax amount.


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Dividend Tax Calculation Example

If you buy $10,000 of stock in Procter & Gamble Company (NYSE: PG) at $142.97 per share, you’ll own 69.9 shares of PG stock. ($10,000/142.97 = 69.9 shares).

The company pays a dividend of $3.65 per share. That puts your annual dividend at $255.29 ($3.65 x 69.9 = $255.29).

From there, you can figure out how much tax you would owe depending on your tax bracket. In the 15% tax bracket, you would pay $38.29 in taxes on your investment in PG stock (255.29 x 0.15 = $38.29).

You can also use the MarketBeat dividend calculator, which calculates the future income power of your dividend investment portfolio. Our dividend yield calculator lets you calculate your dividend stock's current yield in real time.

Dividend Tax FAQ

How much tax do you pay for dividends?

The amount of tax you’ll pay for your dividends depends on whether you have qualified or nonqualified dividends. Most dividends are qualified, which means they will be taxed the same as the current long-term capital gain rate. This has favorable benefits for investors in terms of building long-term wealth. Nonqualified dividends are taxed at ordinary income tax rates. 

How do you avoid dividend tax?

You will have to pay taxes on your dividend income. However, if the dividends are included as part of a retirement account such as a Roth IRA or 401(k), you will only pay taxes once you take a distribution. Since qualified dividends are taxed at the long-term capital gains rate, you would only have to pay a maximum of 20% of your dividend income in taxes, depending on your tax bracket.