HI guys, wondering a question on dividends.. say for example, you're top bracket.. does that mean below the $418k, that dividend's get's taxed at the lower rates of 15%, then moves to the higher 20%? or if you calculate AGI and it's top bracket do you have to pay straight 20% on all of it?? ( this obviously excludes 2.8% / un-qualified dividends..) thanks guys
I completed the Qualified Dividends and Capital Gains Tax Worksheet for Form 1040, Line 44 and all of my qualified dividends were taxed at 15%. If I had a lot more income, most likely the qualified dividends would have all been taxed at 20%. If you look at this worksheet, there are edge cases where your income gets taxed in two different categories (like 0% and 15%), but it appears to happen when you have income slightly higher than one of the limits and if you subtract your qualified dividends, that total is less than that limit. I.e., you are straddling two different categories. For your particular case, I suggest looking at that worksheet. Most likely you will only be in one category.