How much tax will I pay on my dividend income?

This can vary greatly depending on your income, the kind of dividend paid, the corporate structure and domicile of the business you invested in, and the kind of account you hold it in.

How much tax do I pay on dividend payments?

The amount could be anything from nothing to 37% of dividends paid, depending on the kind of dividend, your tax bracket, the kind of account the investment is in, and the corporate structure of the dividend payer.

How do I avoid paying taxes on stock dividends?

Legally, as a starting point! The easiest way for most people is to own dividend-paying stocks in tax-advantaged accounts, such as Roth and traditional IRA, 401(k), and others. Other kinds of dividends, such as return of capital, are tax-free as well, though they lower the tax basis of your holdings, which could result in higher capital gains taxes if you sell at a profit.

Are dividends taxed as capital gains?

Some are, but not all. And the tax rate you pay on those gains can vary, depending on your tax bracket, and the kind of account you hold the investment in.

How Are Dividends Taxed? 2025 and 2026 Dividend Tax Rates

Knowing what you owe, and planning for the future, too.

By Jason Hall – Updated Feb 17, 2026 at 5:16 PM EST | Fact-checked by Margo Winton Parodi

Key Points

Dividends in retirement accounts like Roth IRAs are not taxed.
Tax on dividends depends on income; lower brackets may not owe anything.
Return of capital dividends increase future capital gains tax.

Like other investment earnings, dividend income is generally taxable. However, the amount you owe depends on several factors: your taxable income, the type of dividend you received, and the kind of account holding the investment. Understanding these factors can help you plan ahead and potentially minimize what you owe.

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An infographic explaining how stock dividends are taxed depending on the circumstances. — Image source: The Motley Fool.

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Data source: IRS.

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Ordinary dividends in 2025

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Data source: IRS.

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Data source: IRS.

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Ordinary dividends in 2026

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Data source: IRS.

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Taxation of dividends FAQ

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About the Author

Jason Hall is a contributing Motley Fool stock market analyst with more than a decade of experience writing about dividend stocks and long-term investing. He has been with the company since 2012 and previously spent over 10 years in technical sales in the printing and information services industry. Jason also founded and operated a small food manufacturing business.

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