How to Report a Dividend Earned on Your Taxes

Receiving a dividend payment means a company you have invested in is sharing a portion of its profits with you. As a shareholder, these payments represent a return on your investment in that company’s stock. Corporations distribute these earnings to investors as a way to pass on their financial success. This income, while a benefit of stock ownership, is distinct from the gains you might realize from selling the stock itself.

Qualified Versus Ordinary Dividends

The Internal Revenue Service sorts dividends into two main categories, ordinary and qualified, each with different tax implications. All dividends are by default considered ordinary. These are taxed at the same rates as your regular income, such as wages, which can range up to 37% depending on your total taxable income.

A dividend can be reclassified as a “qualified” dividend if it meets specific criteria, allowing it to be taxed at lower long-term capital gains rates. For the 2025 tax year, these rates are 0%, 15%, or 20%, depending on your filing status and overall taxable income. For example, a single filer with a taxable income up to $48,350 would pay a 0% rate on qualified dividends.

For a dividend to be considered qualified, it must satisfy several IRS requirements. The dividend must be paid by a U.S. corporation or a qualified foreign corporation, such as one that is traded on a major U.S. stock exchange. Certain payments are excluded from being qualified dividends, including those from credit unions, mutual savings banks, tax-exempt organizations, or payments that are considered a return of capital.

Another requirement is the holding period. To receive preferential tax treatment, you must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. The ex-dividend date is the deadline by which an investor must own the stock to receive the upcoming dividend payment.

Understanding Your Dividend Tax Form

Before you can report dividend income, you will receive Form 1099-DIV, “Dividends and Distributions,” from the financial institution or brokerage that manages your investments. You should expect this form to arrive by mail or be available online by January 31. This document is essential for accurately preparing your tax return, as it details the exact amounts and types of distributions you received.

The form contains several numbered boxes that break down your investment income. Box 1a, “Total ordinary dividends,” shows the total amount of all ordinary dividends you were paid during the year. This figure represents the gross amount of distributions and is the starting point for reporting your dividend income.

Within that total, Box 1b, “Qualified dividends,” specifies the portion of your dividends that may be eligible for the lower capital gains tax rates. However, the figure in Box 1b is often reported with the assumption that you have met the necessary holding period for the stock. It is your responsibility to verify that you have held the stock for the required length of time. If you have not met the holding period for any dividend, it is not qualified and must be treated as an ordinary dividend when you file. Another important box is Box 2a, “Total capital gain distributions,” which reports payments from entities like mutual funds or REITs that have sold assets within the fund.

Reporting Dividends on Your Tax Return

The process of reporting dividend income on your tax return begins with the information from your Form 1099-DIV. A factor that determines how you file is the total amount of your ordinary dividend income. If your total ordinary dividends from all sources are more than $1,500, the IRS requires you to file Schedule B, “Interest and Ordinary Dividends,” with your Form 1040. If the total is $1,500 or less, you can report the income directly on Form 1040 without attaching Schedule B.

When completing Schedule B, you will work with Part II, which is designated for ordinary dividends. Here, you must list the name of each individual payer and the corresponding amount of ordinary dividends you received from them. This information is taken directly from Box 1a of each Form 1099-DIV you received. After listing all payers and amounts, you will sum them up on line 6 of Schedule B.

After calculating the total on Schedule B, you transfer this final number to the “Ordinary dividends” line on your main Form 1040. This ensures that all your dividend income is included in your total income calculation for the year. It is a separate step to report your qualified dividends to secure the lower tax rate.

To receive the preferential tax treatment, you must enter your total qualified dividends on the designated line of Form 1040. This is the amount you have confirmed meets all the requirements, including the holding period. Tax software or a tax preparer will use this figure to calculate your tax liability using the applicable 0%, 15%, or 20% capital gains rates.