New Tax Rates

What are the new tax rates on Qualified Dividend Income?

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), beginning in 2003 and continuing through 2008, “qualified dividend income” received by an individual is now taxed at the same tax rates that apply to long-term capital gains.

Note: JGTRRA is scheduled to sunset in 2008. Pre JGTRRA rates will return in 2009.

How are Qualified Dividends reported on Form 1099-DIV?

Qualified Dividends are reported in column 1b of Form 1099-DIV.

Qualified Dividends are included in the “Ordinary Dividends” reported in column 1a.

Example:

Row 1, Column 1a, of the 2004 Form 1099-DIV above reports Ordinary Dividends of $4,718.69. Column 1b reports $500.34 of Qualified Dividends. This means that the $4,718.69 of Ordinary Dividends consists of $500.34 of Qualified Dividends and $4,218.35 of dividends which are not qualified dividends.

Important:

Some dividends may be reported as qualified dividends in Column 1b of Form 1099-DIV but are not qualified dividends to the recipient. These include dividends on stock not meeting the holding period requirement for stock and dividends earned on days during which the risk of loss on the stock is limited by a hedging transaction.