Dividend Dynamics

One of my personal favorite things about owning stocks is their dividend. Something about getting paid while sitting on my couch just really excites me.

Depending on which investment account you set up, there may be important tax implications for your dividends. Where with tax-advantage retirement accounts like IRA's and 401K's, you won't need to pay any taxes on your retirement money, with individual brokerage accounts such as a Robinhood or E-Trade account, you will need to pay taxes on those dollars.

Ordinary dividends will be added onto you regular income and taxed at that income bracket rate. So, if you make $41,000 per year and earn $2,000 in dividends, your $2,000 will be taxed at 22%. See the tax bracket below:

Courtesy of Fortune Magazine

Qualified dividends will be taxed like a long-term capital gain, which is 15%. There are also options for tax free dividends, such as through municipal bonds.

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