Ordinary dividends are taxed as ordinary income at your regular tax rate
When you receive an ordinary dividend from a stock or mutual fund, the IRS treats it the same way it treats wages or salary. You pay income tax on the full amount at whatever tax bracket you fall into that year. This is different from may have access to dividends, which get a lower tax rate. The tax you owe depends on your total income for the year, not on how long you held the stock.
Most dividends paid by corporations are ordinary dividends unless the company specifically designates them as may have access to. Your brokerage or mutual fund company will tell you which type you received on a form called a 1099-DIV, which you receive by January 31 each year. The IRS also receives a copy, so the dividend income is already in the system when you file your tax return.
Key Takeaways
- Ordinary dividends are taxed at your full income tax rate, which ranges from 10% to 37% depending on your total income and filing status.
- Your brokerage reports ordinary dividends on Form 1099-DIV, which you must include on your tax return even if you did not receive a paper copy.
- may have access to dividends receive preferential tax rates (0%, 15%, or 20%) but only if the stock was held for more than 60 days around the dividend date.
- Reinvested dividends — those automatically used to buy more shares — are still taxable income in the year they are paid, not when you sell the shares.
What counts as an ordinary dividend
An ordinary dividend is any payment a corporation makes to shareholders from its earnings or profits, unless the company marks it as a may have access to dividend. Most everyday stock dividends fall into this category. Real estate investment trusts (REITs) almost always pay ordinary dividends. Mutual funds that hold bonds or other investments also typically distribute ordinary dividends.
Some companies pay dividends that are actually a return of your original investment rather than earnings — these are called return of capital dividends and are handled differently for tax purposes. Your 1099-DIV will separate these out. The form will also show if any portion of your dividend came from short-term capital gains, which are also taxed as ordinary income.
How ordinary dividend tax rates work
Your ordinary dividend income gets added to all your other income for the year — wages, interest, self-employment earnings, and so on. The total determines which tax bracket you fall into. If you earned $50,000 in wages and received $5,000 in ordinary dividends, you pay tax on $55,000 total.
The tax brackets change each year. For 2024, the federal income tax rates range from 10% to 37%. A single filer in the 22% bracket pays 22% on ordinary dividends. A married couple filing jointly in the 24% bracket pays 24%. State income tax also applies in most states, which can add another 3% to 13% depending on where you live.
If your total income is very low, you may owe no federal income tax at all, even on dividend income. The standard deduction — the amount you can earn tax-free — was $13,850 for single filers and $27,700 for married couples filing jointly in 2024. If your income falls below that, you report the dividends but owe no tax.
Reporting ordinary dividends on your tax return
You report ordinary dividends on Schedule B (Interest and Ordinary Dividends) if your total dividend and interest income exceeds $1,500. If it is $1,500 or less, you can report it directly on Form 1040 without filing Schedule B. Either way, the amount goes into your taxable income calculation.
You must report all ordinary dividends even if you did not receive a 1099-DIV form. If your brokerage failed to send one or sent it to the wrong address, you are still responsible for reporting the income. The IRS has a copy from the brokerage, so unreported dividends will trigger a notice. If you lost your 1099-DIV, contact your brokerage and request a replacement or a statement showing the dividend payments.
The deadline to file your tax return is usually April 15. Ordinary dividends received in 2024 are reported on your 2024 tax return, filed in 2025. If you owe taxes on the dividends, that payment is due by the same April 15 deadline.
Reinvested dividends and tax liability
If your brokerage automatically reinvests your dividends — using the payment to buy more shares instead of sending you cash — you still owe income tax on the full dividend amount in the year it was paid. Reinvestment does not defer the tax. You pay tax on the dividend in year one, then later when you sell those newly purchased shares, you pay capital gains tax on any profit.
This matters because reinvested dividends increase your cost basis in the stock. If you received $1,000 in reinvested dividends and later sold the stock, that $1,000 counts as part of what you paid for the shares, reducing your taxable gain. Keep records of all reinvested dividends so you can calculate your cost basis correctly when you eventually sell.
Ordinary dividends versus may have access to dividends
The key difference is the tax rate. may have access to dividends receive preferential rates: 0%, 15%, or 20% depending on your income level. Ordinary dividends use your regular income tax rate, which is almost always higher. A may have access to dividend in the 22% bracket is taxed at 15%. An ordinary dividend in the same bracket is taxed at 22%.
To may have access to for the lower rate, you must have held the stock for more than 60 days during the 121-day period centered on the dividend payment date. If you bought the stock two days before the dividend and sold it two days after, it does not may have access to. Mutual funds and ETFs that hold stocks can also pay may have access to dividends, but the fund must have held the underlying stocks long enough, and you must have held the fund shares long enough.
Your 1099-DIV separates may have access to and ordinary dividends into different boxes. If box 1a shows ordinary dividends and box 1b shows may have access to dividends, you report them on different lines of your tax return and use different tax rates.
State and local taxes on ordinary dividends
Most states tax ordinary dividend income as part of your regular state income tax. A few states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — do not have a state income tax at all. New Hampshire and Tennessee tax only dividend and interest income, not wages.
If you live in a state with income tax, ordinary dividends are taxed at your state rate, which typically ranges from 3% to 13%. Some cities also impose local income tax. New York City, for example, taxes residents on dividend income at rates up to 3.9%. Your total tax on an ordinary dividend can easily reach 30% to 40% when you combine federal, state, and local rates.
Frequently Asked Questions
Do I have to report ordinary dividends if the amount is small?
Yes. You must report all ordinary dividends on your tax return, even if you received only $10. The IRS receives a copy of your 1099-DIV from your brokerage, so unreported income will be flagged. The only exception is if your total dividend and interest income is under $1,500 and you are not required to file a tax return for other reasons.
What if I received a dividend but no 1099-DIV?
Contact your brokerage and request a corrected or replacement 1099-DIV. You are still responsible for reporting the dividend even if the form does not arrive. If the brokerage cannot locate the payment, ask for a written statement showing the dividend date and amount, which you can use to file your return.
Can I deduct losses on dividend-paying stocks from my dividend income?
No. Dividend income and capital losses are separate. You report the full dividend as income at your regular tax rate. If you sold the stock at a loss, you report that loss separately on Schedule D (Capital Gains and Losses). Capital losses can offset capital gains and up to $3,000 of ordinary income per year.
Are dividends from my 401(k) or IRA taxed differently?
No tax is owed on dividends inside a 401(k) or traditional IRA while the money stays in the account. You pay income tax only when you withdraw the money. Dividends in a Roth IRA are never taxed. Dividends in a regular taxable brokerage account are always taxed in the year received, regardless of whether you reinvest them.
What if my dividend income pushes me into a higher tax bracket?
Ordinary dividends are added to your other income and taxed at the marginal rate for your total income. If you earned $45,000 in wages and $10,000 in ordinary dividends, the $10,000 is taxed at whatever rate applies to the $55,000 total. This can push you into a higher bracket, meaning you pay more tax on the dividends than you would have if your wage income were lower.