may have access to dividends are taxed at lower rates than your regular income, but the exact rate depends on your total income for the year
The tax rate on may have access to dividends is not a single number. Instead, the IRS places you into one of three brackets based on your total taxable income: 0%, 15%, or 20%. Most people fall into the 15% bracket. The bracket you land in has nothing to do with the dividend amount itself — it depends on whether your income is low, middle, or high for the year.
This is different from ordinary dividends and interest income, which are taxed at your regular income tax rate (which can be 10%, 12%, 22%, 24%, 32%, 35%, or 37%, depending on your income). may have access to dividends almost always cost you less in tax, which is why the IRS created this category in the first place.
Key Takeaways
- may have access to dividends are taxed at 0%, 15%, or 20% depending on your total taxable income for the year, not based on the dividend amount alone.
- The 0% rate applies only to people whose taxable income falls below a certain threshold, which varies by filing status and changes each year.
- Most taxpayers in the middle-income range pay 15% on may have access to dividends, while high-income earners pay 20%.
- Your ordinary income is taxed first, and may have access to dividends are taxed at the end of your income stack, which can push you into a higher dividend tax bracket.
- You must report may have access to dividends on Schedule B and Form 1040 to receive the lower tax rate; ordinary dividends do not may have access to for this treatment.
The three may have access to dividend tax brackets and 2024 income thresholds
The IRS sets income thresholds each year that determine which bracket you fall into. For the 2024 tax year (filed in 2025), the thresholds are:
| Tax Rate | Single Filers | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | Up to $47,025 | Up to $94,050 | Up to $47,025 | Up to $62,700 |
| 15% | $47,025 to $518,900 | $94,050 to $583,750 | $47,025 to $291,875 | $62,700 to $551,350 |
| 20% | Over $518,900 | Over $583,750 | Over $291,875 | Over $551,350 |
These thresholds change every year because the IRS adjusts them for inflation. If you filed last year, do not assume the same bracket applies this year — check the current year's thresholds on the IRS website or your tax software.
The thresholds are based on your taxable income, not your gross income. Taxable income is what remains after you subtract the standard deduction, any adjustments, and any deductions you claim. This is an important distinction because it means you can earn more than the threshold in gross income and still fall into a lower bracket.
How your ordinary income affects your may have access to dividend tax rate
Your may have access to dividends do not sit in isolation. The IRS taxes your ordinary income first — wages, interest, business income, and so on — and then taxes your may have access to dividends on top of that. This stacking effect can push you into a higher dividend bracket even if your total income would normally put you in a lower one.
For example, suppose you are a single filer with $40,000 in wages and $10,000 in may have access to dividends. Your taxable income is $50,000 (assuming the standard deduction). Your wages fill the first $40,000 of the 0% bracket (which goes up to $47,025). Your dividends then fill the remaining $7,025 of the 0% bracket, and the last $2,975 of your dividends are taxed at 15%. You do not pay 0% on all your dividends — only the portion that fits in the remaining bracket space.
This is why knowing your total income for the year matters. If you receive a large bonus or sell an asset, it can push your may have access to dividends into a higher bracket even though the dividend amount itself did not change.
Why may have access to dividends get a lower rate than ordinary income
Congress created the may have access to dividend rate in 2003 to encourage people to invest in stocks. The logic was that lower tax rates on dividends would make stock ownership more attractive and boost investment. Ordinary dividends — those that do not meet the IRS holding period rules — are taxed at your regular income tax rate, which is typically much higher.
To receive the lower rate, your dividend must come from a U.S. corporation or a may have access to foreign corporation, and you must have owned the stock for a specific holding period. For most dividends, that means you held the stock for more than 60 days during the 121-day window centered on the ex-dividend date. If you do not meet these rules, the dividend is taxed as ordinary income at your regular rate, which could be 22%, 24%, 32%, 35%, or 37% depending on your income.
How to report may have access to dividends on your tax return
may have access to dividends are reported on Schedule B (Interest and Ordinary Dividends), which you attach to your Form 1040. Your brokerage or mutual fund company sends you a Form 1099-DIV in January showing which dividends are may have access to and which are ordinary. The form breaks them out into separate boxes so you know which ones get the lower rate.
On Schedule B, you list may have access to dividends separately from ordinary dividends. The may have access to dividend total then transfers to a specific line on Form 1040 (line 5b for the 2024 tax year, though this can shift year to year). Your tax software will handle this routing automatically if you enter the numbers correctly, but if you are preparing your return by hand, make sure you put may have access to dividends on the right line.
If you report may have access to dividends on the wrong line or fail to distinguish them from ordinary dividends, the IRS will tax them at your ordinary income rate, which costs you more. This is one of the most common mistakes people make when they receive dividends for the first time.
What happens if you do not meet the holding period requirement
If you owned the stock for 60 days or fewer during the 121-day window around the ex-dividend date, the dividend is taxed as ordinary income. This can happen if you bought the stock shortly before the dividend was paid or sold it shortly after. Some investors do this intentionally — they buy a stock right before a dividend, collect it, and sell when ready. The dividend is then taxed at their ordinary rate, which can be significantly higher than the may have access to rate.
Your brokerage reports this on Form 1099-DIV by putting the amount in the "ordinary dividends" box rather than the "may have access to dividends" box. If you see a dividend you expected to be may have access to listed as ordinary, contact your brokerage to verify the holding period. Sometimes the holding period calculation is complex, especially if you sold covered calls or bought protective puts around the ex-dividend date.
State and local taxes on may have access to dividends
The federal tax rate on may have access to dividends is 0%, 15%, or 20%, but your state and local government may tax them differently. Some states tax may have access to dividends at a lower rate than ordinary income, some tax them at the same rate as ordinary income, and a few states do not tax dividends at all. This varies widely by state and changes periodically.
Your state tax bill on dividends depends on where you live and where the corporation is incorporated, which can get complicated if you live in one state and own stock in a corporation incorporated in another. For planning purposes, assume your state will tax may have access to dividends at its ordinary income rate unless you know otherwise. Check your state's tax agency website or ask a tax professional if you live in a high-tax state and receive substantial dividends.
Frequently Asked Questions
Can I pay 0% tax on all my may have access to dividends?
Only if your total taxable income stays below the 0% threshold for your filing status. For 2024, that is $47,025 for single filers and $94,050 for married filing jointly. If your income exceeds that, your dividends will be taxed at 15% or 20% on the portion that spills over. You cannot pick and choose which dividends get the 0% rate.
Do I have to do anything special to get the may have access to dividend rate?
No, as long as you meet the holding period requirement and report the dividends correctly on your tax return. Your brokerage identifies may have access to dividends on Form 1099-DIV, and your tax software or return preparer will explore the correct rate automatically. The only thing you have to do is make sure you report them on the right line of your Form 1040.
What if I sell a stock before the ex-dividend date?
You do not receive the dividend at all if you sell before the ex-dividend date. The person who owns the stock on the ex-dividend date receives the dividend. If you sold the stock, you have no dividend to report, and there is nothing to tax.
Are dividends from my 401(k) or IRA taxed at the may have access to rate?
No. Dividends inside a 401(k) or traditional IRA are not taxed at all while the money is in the account. When you withdraw money from a traditional IRA or 401(k), the entire withdrawal is taxed as ordinary income at your regular rate, regardless of whether it came from dividends, capital gains, or interest. Roth IRA withdrawals are tax-free if you meet the rules.
How do I know if a foreign dividend is may have access to?
The dividend must come from a may have access to foreign corporation, which generally means a corporation incorporated in a U.S. possession or a country with a tax treaty with the United States. Your brokerage will identify these on Form 1099-DIV. If you are unsure whether a foreign dividend qualifies, ask your brokerage or check the IRS list of may have access to foreign corporations.