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Qualified dividend tax question
Old 12-13-2013, 07:40 AM   #1
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Qualified dividend tax question

Qualified dividends in a taxable account are taxed at 0% if total income falls under the 25% tax bracket.
Are the the qualified dividends figured into the total amount or kept separate and not included until the other income has determined the tax bracket. In other words , can the Q dividends carry you over into the 25% bracket or are they only taxed afterwards on a separate basis?
Our income in retirement is 25% Soc Sec, 50% IRA distribution, and 25% Qualified dividends from a taxable account.
Hope I made myself clear on this.
Thanks
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Old 12-13-2013, 07:52 AM   #2
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QD are taxed at 0% if your income is below the 15% bracket, Publication 17 (2013), Your Federal Income Tax

QD count towards your income. Try the Taxcaster tool at turbotax https://turbotax.intuit.com/tax-tool...ors/taxcaster/
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Old 12-13-2013, 08:02 AM   #3
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Quote:
Originally Posted by rbmrtn View Post
QD are taxed at 0% if your income is below the 15% bracket, Publication 17 (2013), Your Federal Income Tax

QD count towards your income. Try the Taxcaster tool at turbotax https://turbotax.intuit.com/tax-tool...ors/taxcaster/
No, they are taxed at 0% if your taxable income is in the 15% bracket or lower (not below 15% because it include the 15% bracket). OP had it right, if your bracket is lower than 25%.

Quote:
The maximum rate of tax on qualified dividends is:

0% on any amount that otherwise would be taxed at a 10% or 15% rate.

15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39.6%.

20% on any amount that otherwise would be taxed at a 39.6% rate.
And like LTCGs the income is counted, it is just when taxes are calculated different rates are applied one for ordinary income and another for qualified dividends and LTCGs.
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Old 12-13-2013, 08:04 AM   #4
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Don't know why I said 25% in the first line I wrote. Thanks for the reply. I'll check out the app.
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Old 12-13-2013, 08:13 AM   #5
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Originally Posted by pb4uski View Post
No, they are taxed at 0% if your taxable income is in the 15% bracket or lower (not below 15% because it include the 15% bracket). OP had it right, if your bracket is lower than 25%.
Yes I meant in the 15% ( below 25% ).
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Old 12-13-2013, 09:08 AM   #6
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I saw a good demonstration of how these parallel tax brackets work when I was preparing my own taxes back in 2008, the year I cashed out my company stock and ERed. (I was able to cash it out using NUA, or Net Unrealized Appreciation, and as a result most of it was taxed as LTCGs just like QDs are.)

My taxable income, excluding the huge LTCGs, was in the 15% bracket. This meant that a small portion of the LTCGs from the sale of the company stock ended up being taxed at 0% with the remainder of it (most of it) taxed at 15%, the highest rate applicable at the time. Of course, while this huge LTCG was mostly taxed at only 15%. it still tossed the rest of my income into the AMT so the small saving from having some of that income taxed at 0% was dwarfed by how much more I had to pay from the AMT. Still, paying only 15% on that huge, lump-sum payout was a key part for me to be able to ER when I did.
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