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How to Plan for Taxes on Dividends

by Peter J. Creedon

By Zina Kumok

Certified financial planner (CFP) Peter J. Creedon, of Crystal Brook Advisors, said one of the best aspects of dividends is that they aren’t taxed like capital gains or ordinary income. That makes the potential tax sting that much less painful to bear.

“Dividends are usually taxed at a lower rate than ordinary income or interest (bond),” he said. “If your taxable income falls below the 25% tax bracket you may wind up paying 0% in taxes. The tax bracket at or above 25% but below 39.6% is normally taxable at 15%. If income falls in the 39.6% bracket or above the rate on a long term capital gain and qualified dividend is 20%.”

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