How to Report Dividend Income on the 2022 Federal Income Tax Return (2024)

How to Report Dividend Income on the 2022 Federal Income Tax Return (1)

Federal employees and retirees who received during 2022 in their brokerage (non-retirement) accounts ordinary dividends (reported to them in Box 1a of Form 1099-DIV) must report the ordinary dividends on IRS Form 1040, line 3b. Copies of IRS Form 1099-DIV and Form 1040 (lines 1 through 7) are presented here:

How to Report Dividend Income on the 2022 Federal Income Tax Return (2)

2022 FORM 1040 Lines 1 through 7:

How to Report Dividend Income on the 2022 Federal Income Tax Return (3)

If the total amount of ordinary dividends is greater than $1,500 during 2022, then Schedule B of Form 1040 must be attached to Form 1040. The portion of the ordinary dividends that qualify for a “preferential” tax rate (a lower tax rate than the “ordinary” tax rate, explained below) are called “qualified dividends”. Qualified dividends are reported on in Box 1b of Form 1099-DIV and entered on line 3a of Form 1040.

What are “Preferential” Tax Rates?

Since 2003, lower tax rates have been applied to long-term capital gains (capital gains resulting from the sale of capital assets owned for more than one year) and qualified dividends. Theses “preferential” rates are lower than the “ordinary” tax rates applied to earned income (wages/salary), interest income. IRA and pension income, rental income, and Social Security income. The Tax Cuts and Jobs Act of 2017 retained the 0 percent, 15 percent and 20 percent rates on long-term capital gains and qualified dividends for individuals. For the years 2018 through 2025, these rates have their own brackets that are not tied to the ordinary income brackets

The following table presents the 2022 tax brackets (using an individual’s 2022 taxable income equal to the individual’s adjusted gross income less the appropriate standard deduction) for taxing long-term capital gains and qualified dividends:

How to Report Dividend Income on the 2022 Federal Income Tax Return (4)

The following two examples illustrate the difference in federal income taxes paid with respect to ordinary tax rates versus preferential tax rates:

Advertisem*nt

How to Report Dividend Income on the 2022 Federal Income Tax Return (5)

Example 1. During 2022 Cecelia, who files her income taxes as single and is in a 22 percent federal marginal tax bracket. Her taxable income during 2022 was $72,000. She received $3,000 in qualified dividends. Cecelia will pay on her 2022 federal income the following tax on the $3,000 of qualified dividends:

$3,000 times 15 percent, or $450

Example 2. During 2022, William who files his income taxes as married filing jointly is in a 24 percent federal marginal tax bracket. His and his spouse’s 2022 taxable income was $195,000. They received $3,000 in taxable interest income. William and his spouse will pay on their 2022 federal income tax return the following tax on the $3,000 of interest income:

$3,000 times 24 percent, or $720

Note that had William and his spouse received the same $3,000 in the form of qualified dividends, they would have paid a federal income tax of:

$3,000 times 15 percent, or $450 (a difference of $270)

How Does an Ordinary Dividend Be Classified as a Qualifying Dividend?

In order for an ordinary dividend to be a qualifying dividend, the stock dividend must meet the following requirements:

(1) The dividend must be paid by a US corporation or a qualified foreign corporation;

(2) The owner of the stock paying the dividend must have owned the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date and ends 60 days after the ex-dividend date;

(3) Foreign dividends qualify only if the stock is traded on a US stock exchange; and (4) Capital gains distributions, distributions from tax-exempt entities, dividends from mutual insurance companies, and dividends from certain Employee Stock Ownership Plans (ESOPs) are not considered Qualified Dividends.

Dividends from Credit Unions/Life Insurance

Dividends from credit unions are payments of interest and are reported on line 2b of Form 1040 as interest income.

Dividends on certain life insurance casualty insurance policies that are paid out by the insurance company to the insurance policyholder are a “return of premium” and not income until the dividends exceed the policyholder’s total premium payments. However, any interest paid on accumulated dividends is taxable as interest income in the year paid.

Internal Revenue Code (IRC) Section 199A Dividends

Box 5 of Form 1099-DIV reports qualified Real Estate Investment Trust (REIT) dividends. The individual who owns this qualified REIT and received these dividends is eligible for the Section 199A deduction for qualified business income. A qualified REIT dividend is any dividend from a REIT that is not a capital gain dividend or a qualified dividend. The Section 199A dividends are included in box line 1a (total ordinary dividends) of Form 1099-DIV.

Mutual Fund/REIT Dividends Received in January 2023

Dividends that were declared by a mutual fund or a REIT in the last quarter of 2022 but actually paid in January 2023 are treated as paid in 2022 and therefore should be included on the 2022 federal income tax return as dividend income.

Nondividend Distributions

1. A non-dividend distribution is not paid out of the earnings and profits of a corporation or a mutual fund. The stock or mutual fund owner should receive a Form 1099-DIV or other statement showing the non-dividend distribution. On Form 1099-DIV, a nondividend distribution is shown in Box 3. If no Form 1099-DIV or statement is issued, then the recipient of the nondividend reports the distribution as an ordinary dividend on line 3b of Form 1040.

2. A nondividend distribution from a stock reduces the cost basis of the stock until the cost basis of the stock (the price paid for the stock) is fully recovered. This nontaxable portion is called a return of capital.

3. Liquidating distributions – sometime called liquidating dividends – are distributions received during a partial or complete liquidation of a corporation. These distributions are, or at least in part one form of a return of capital The stock owner will receive a Form 1099-DIV from the corporation showing the amount of the liquidation distribution in Box 9 or 10.

4. Distributions by a corporation of its own stock are commonly known as stock dividends. Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation’s stock. Stock dividends and stock rights are generally not taxable.

Related:

  • How to Report Capital Gains and Losses on the 2022 Federal Income Tax Return
  • Reporting Interest Income on the 2022 Federal Income Tax Return

About Edward A. Zurndorfer

How to Report Dividend Income on the 2022 Federal Income Tax Return (6)Edward A. Zurndorfer is a Certified Financial Planner (CFP®), Chartered Life Underwriter, Chartered Financial Consultant, Registered Health Underwriter and Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, located at 833 Bromley Street Suite A, Silver Spring, MD 20902-3019
DISCLAIMER: The information presented on MyFederalRetirement.com is provided for general information purposes. The information has been obtained from sources considered to be reliable. The information is offered with the understanding that the publisher is not engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. For more information, please read our Terms of Service.
How to Report Dividend Income on the 2022 Federal Income Tax Return (2024)

FAQs

How to Report Dividend Income on the 2022 Federal Income Tax Return? ›

Answer: Enter the ordinary dividends from box 1a on Form 1099-DIV, Dividends and Distributions on line 3b of Form 1040, U.S. Individual Income Tax Return, Form 1040-SR, U.S. Tax Return for Seniors or Form 1040-NR, U.S. Nonresident Alien Income Tax Return.

How to declare dividends on a tax return? ›

You declare the dividends in the tax year that you receive them. Dividends paid by your company Feb to Feb, should be declared in the tax year that you received them. Eg. Feb 2020 to Feb 2021 should be declared in 2020 to 2021 Tax return.

Where do you report dividend income over $1500? ›

When to File Schedule B. The main reason to file Schedule B is to report any interest income and ordinary dividends received from investments that exceed $1,500.

How much dividend income must be reported? ›

If you receive over $1,500 of taxable ordinary dividends, you must report these dividends on Schedule B (Form 1040), Interest and Ordinary Dividends. If you receive dividends in significant amounts, you may be subject to the Net Investment Income Tax (NIIT) and may have to pay estimated tax to avoid a penalty.

How do you report dividend income on a tax return? ›

Enter the ordinary dividends from box 1a on Form 1099-DIV, Dividends and Distributions on line 3b of Form 1040, U.S. Individual Income Tax Return, Form 1040-SR, U.S. Tax Return for Seniors or Form 1040-NR, U.S. Nonresident Alien Income Tax Return.

How to declare a dividend? ›

(1) The company may by ordinary resolution declare dividends, and the directors may decide to pay interim dividends. (2) A dividend must not be declared unless the directors have made a recommendation as to its amount.

Do I have to report dividend income less than $10? ›

The IRS does not require 1099 Forms in cases where the interest, dividends or short-term capital gain distributions are under $10. However, the IRS does require individuals to report these amounts under $10 on their tax returns.

Do I have to report 1099-DIV on my tax return? ›

If you receive $10 or more in dividends, you will receive a Form 1099-DIV. This form shows the dividends you received, any taxes withheld, non-dividend distributions, capital gains distributions, investment expenses, and certain other types of gains. You will need to report this income on your tax return.

Where do you show dividend income? ›

The income earned by the person from the trading activities is taxable under the head business income. Thus, if shares are held for trading purposes then the dividend income shall be taxable under the head income from business or profession.

How to calculate tax on dividend income? ›

The DDT rate is 15% on the gross dividend amount as per Section 115O. i.e., the effective DDT rate is 17.65%* on the dividend amount. However, for dividends that fall U/S 2(22)(e) of Income Tax Act, the DDT rate is 30%.

How do I calculate my dividend income? ›

To calculate how much you'll receive, multiply the dividend yield by the stock's par value and then multiply that amount by the number of shares that you own.

How to avoid tax on dividend income? ›

You can submit Form 15G/15H to the company or mutual fund declaring that your total income for the financial year is below the taxable limit. Thus, TDS should not apply to your dividend income. 3. If you have invested in a tax-free bond, you have no TDS. will apply to the interest income received.

How do you pay estimated taxes on dividend income? ›

You may send estimated tax payments with Form 1040-ES by mail, or you can pay online, by phone or from your mobile device using the IRS2Go app. You can also make your estimated tax payments through your online account, where you can see your payment history and other tax records. Go to IRS.gov/account.

How do I claim dividend tax? ›

Similarly, a senior citizen whose estimated annual tax payable is nil can submit Form 15H to the company paying the dividend. The mutual fund informs the shareholder about the dividend declaration on their registered mail id and requires submission of form 15G or form 15H to claim dividend income without TDS.

Do dividends have to be reported to IRS? ›

If you had over $1,500 of ordinary dividends or you received ordinary dividends in your name that actually belong to someone else, you must file Schedule B (Form 1040), Interest and Ordinary Dividends. Please refer to the Instructions for Form 1040-NR for specific reporting information when filing Form 1040-NR.

Should I declare dividend income? ›

The DDT was eliminated by the Finance Act of 2020, and investors are now subject to dividend taxes under the traditional tax system. Therefore, regardless of the amount received at the applicable income tax slab rates, dividend income will now be taxable in the hands of taxpayers.

Are dividends declared income or expense? ›

Key Takeaways

Cash or stock dividends distributed to shareholders are not recorded as an expense on a company's income statement. Cash dividends are cash outflows to a company's shareholders and are recorded as a reduction in the cash and retained earnings accounts.

Top Articles
Latest Posts
Article information

Author: Moshe Kshlerin

Last Updated:

Views: 6112

Rating: 4.7 / 5 (57 voted)

Reviews: 80% of readers found this page helpful

Author information

Name: Moshe Kshlerin

Birthday: 1994-01-25

Address: Suite 609 315 Lupita Unions, Ronnieburgh, MI 62697

Phone: +2424755286529

Job: District Education Designer

Hobby: Yoga, Gunsmithing, Singing, 3D printing, Nordic skating, Soapmaking, Juggling

Introduction: My name is Moshe Kshlerin, I am a gleaming, attractive, outstanding, pleasant, delightful, outstanding, famous person who loves writing and wants to share my knowledge and understanding with you.