The tax rate on may have access to dividends depends on your total income, not the dividend amount alone
may have access to dividends are taxed at one of three rates: 0%, 15%, or 20%. Which rate applies to you depends on your taxable income for the year, not on how much dividend income you received. The IRS sets income thresholds that change each year, and your filing status (single, married filing jointly, head of household) determines which threshold applies to you.
This is different from ordinary income, which is taxed at rates ranging from 10% to 37%. Because may have access to dividends get preferential rates, they often result in lower taxes than the same amount of ordinary income would.
You do not pay the rate on dividends alone. Instead, the IRS stacks your dividend income on top of your other income (wages, interest, capital gains) to find your total taxable income, then applies the appropriate rate to the dividend portion.
Key Takeaways
- may have access to dividends are taxed at 0%, 15%, or 20% depending on your total taxable income for the year, with thresholds that vary by filing status.
- Your filing status (single, married filing jointly, head of household, or married filing separately) determines which income threshold applies to you.
- The IRS adjusts the income thresholds annually for inflation, so the exact dollar amounts change from year to year.
- You must hold the stock for at least 60 days around the dividend payment date for the dividend to count as may have access to; otherwise it is taxed as ordinary income.
The three tax brackets for may have access to dividends in 2024
For the 2024 tax year (filed in 2025), the income thresholds are:
| Filing Status | 0% Rate | 15% Rate | 20% Rate |
|---|---|---|---|
| Single | Up to $47,025 | $47,026 to $518,900 | Over $518,900 |
| Married Filing Jointly | Up to $94,050 | $94,051 to $583,750 | Over $583,750 |
| Head of Household | Up to $62,975 | $62,976 to $551,350 | Over $551,350 |
| Married Filing Separately | Up to $47,025 | $47,026 to $291,875 | Over $291,875 |
These thresholds are based on your taxable income, which is your gross income minus deductions (standard or itemized). If your taxable income falls within the 0% bracket, you pay no federal tax on may have access to dividends. If it falls in the 15% bracket, you pay 15% on those dividends. If it exceeds the top threshold, you pay 20%.
These numbers change annually. The IRS adjusts them for inflation each January, so the 2025 thresholds will be different from 2024. When you file your tax return, use the thresholds for the year you are reporting income for, not the current year.
How income stacking works with may have access to dividends
The IRS does not separate dividend income from other income when calculating your tax rate. Instead, it stacks everything together. Your wages, interest, capital gains, and dividends all add up to your total taxable income, and that total determines which bracket you fall into.
Example: You are single and earned $40,000 in wages. You received $10,000 in may have access to dividends. Your total taxable income is $50,000. Since the 0% bracket for single filers ends at $47,025, your first $7,025 of dividends ($47,025 minus $40,000) is taxed at 0%, and the remaining $2,975 is taxed at 15%. You do not pay 15% on all $10,000 of dividends.
This stacking rule means that earning other income during the year can push you into a higher tax bracket for your dividends. If you have control over the timing of income (for instance, if you are self-employed or can defer a bonus), you might lower your dividend tax rate by spreading income across years.
State and local taxes on may have access to dividends
The federal rates described above apply only to your federal income tax. Most states also tax dividend income, and state rates do not follow the federal preferential treatment. Some states tax dividends as ordinary income at their regular rates. A few states do not tax dividends at all.
State tax rates vary widely. New York taxes dividends as ordinary income at rates up to 10.9%. California taxes them at rates up to 13.3%. Texas, Florida, and several other states have no state income tax. Your total tax bill on dividends includes both federal and state taxes, so the effective rate you pay may be significantly higher than the federal rate alone.
Check your state's tax authority website or speak with a tax preparer to understand how your state treats may have access to dividends. This is especially important if you live in a high-tax state or if you receive substantial dividend income.
Why may have access to dividends get lower rates than ordinary income
Congress set preferential rates for may have access to dividends to encourage long-term investment. The logic is that lower taxes on dividends make stocks more attractive to hold, which increases capital formation and investment in businesses.
To receive the preferential rate, you must meet two conditions. First, the dividend must come from a U.S. corporation or a may have access to foreign corporation (generally, one traded on a U.S. exchange). Second, you must have held the stock for more than 60 days during the 121-day period centered on the ex-dividend date. If you do not meet both conditions, the dividend is taxed as ordinary income at your regular rate, which is usually higher.
This holding period rule prevents investors from buying a stock just before a dividend payment and selling immediately after. If you hold the stock for fewer than 61 days, the IRS treats the dividend as ordinary income, not may have access to income.
How to report may have access to dividends on your tax return
Your brokerage or mutual fund company sends you a Form 1099-DIV each January showing how much you received in may have access to and non-may have access to dividends. You report this information on Schedule B (Interest and Ordinary Dividends) and Schedule D (Capital Gains and Losses) of your Form 1040.
The tax software you use (or your tax preparer) will automatically apply the correct rate based on your total income and filing status. You do not calculate the rate yourself. However, you do need to make sure your brokerage reported dividends correctly. If a dividend is marked as non-may have access to when it should be may have access to, you may be able to correct it by providing documentation of your holding period.
If you received dividends from a foreign corporation or a real estate investment trust (REIT), those are usually taxed as ordinary income, not at the preferential may have access to dividend rates. Your 1099-DIV will show this breakdown, so check the form carefully.
Frequently Asked Questions
Do I pay the same tax rate on all my may have access to dividends?
Not necessarily. If your total taxable income straddles a bracket boundary, some of your dividends may be taxed at 0%, some at 15%, and some at 20%. The IRS applies rates in order, so lower-rate income fills the lower brackets first. Your tax software calculates this automatically.
What happens if I sell the stock before the 60-day holding period ends?
The dividend becomes non-may have access to and is taxed as ordinary income at your regular rate, which is typically higher than the preferential may have access to dividend rate. This can significantly increase your tax bill on that dividend, so it is worth checking your holding period before selling.
Are dividends from my 401(k) or IRA taxed at the may have access to dividend rate?
No. Dividends inside retirement accounts are not taxed at the may have access to rate because they are not taxed at all until you withdraw money from the account. When you do withdraw, the entire amount is taxed as ordinary income, regardless of whether it came from dividends or capital gains.
Do I owe taxes on may have access to dividends if my income is below the 0% bracket threshold?
No. If your total taxable income falls within the 0% bracket for your filing status, you owe no federal tax on may have access to dividends. However, you still must report the dividends on your tax return, and you may owe state taxes depending on where you live.
Can I reduce my may have access to dividend tax by spreading income across multiple years?
Possibly, if you have control over when you receive income. For example, if you are self-employed or can defer a bonus, timing income to keep your total below a bracket threshold could lower your dividend tax rate. However, this strategy is complex and depends on your specific situation. Speak with a tax professional before attempting it.