What’s a gross dividend?
For tax reasons, a gross dividend is an investor’s total dividends, like gross income. Before deducting taxes, fees, and charges, gross dividends include all regular dividends, capital-gains distributions, and nontaxable distributions the taxpayer receives throughout the year.
Understanding Gross Dividend
American investors often get gross dividends on IRS Form 1099-DIV. The report lists ordinary dividends in Box 1a and additional dividend income elsewhere. All dividends are ordinary unless expressly designated as qualifying. Report qualifying dividends in Box 1b, which reflects the percentage of Box 1a eligible for reduced capital gains taxes. Non-dividend payouts are in Box 3.
A 1099-DIV is required for individuals receiving ten dollars or more in dividends, stock distributions, or funds withheld for foreign tax payments in a given year. Schedule B does not reflect all 1099-DIV dividend income.
Many countries tax dividends lower than ordinary income. Dividend-paying stocks may offer better tax circumstances for investors. Dividend taxes vary based on income and whether they are eligible or nonqualified.
Gross vs. Net Dividend Example
Example: ABCXYZ firm declares a $1.20 dividend for shareholders. The corporation pays $1.20 per share in dividends. A shareholder with 1,000 shares would get $1,200 in gross dividends annually. U.S. firms pay quarterly dividends, whereas foreign companies pay yearly or semi-annually.
With a 35% tax rate and 2% for fees and expenditures, the net dividend would be $756. A qualifying dividend with a 15% tax rate would result in a net dividend of $996.
Conclusion
- For tax purposes, gross dividends include regular dividends, capital gains, and nontaxable payments.
- Qualified dividends and dividend fees will reduce gross dividends.
- IRS Form 1099-DIV calculates dividend and investment income taxable exposure.
