What Is Dividend Income? Do Dividends Count as Income?

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Infographic defining and comparing qualified and nonqualified dividends — Image source: The Motley Fool

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Data source: IRS.
2021 Ordinary Dividend Tax Rate	For Single Taxpayers	For Married Couples Filing Jointly	For Heads of Households
10%	Up to $9,950	Up to $19,900	Up to $14,200
12%	$9,951 to $40,525	$19,901 to $81,050	$14,201 to $54,200
22%	$40,526 to $86,375	$81,051 to $172,750	$54,201 to $86,350
24%	$86,376 to $164,925	$172,751 to $329,850	$86,351 to $164,900
32%	$164,926 to $209,425	$329,851 to $418,850	$164,901 to $209,400
35%	$209,426 to $523,600	$418,851 to $628,300	$209,401 to $523,600
37%	$523,601 or more	$628,301 or more	$523,601 or more

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Below are the income tax brackets for the 2022 tax year:

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Data source: IRS.
2022 Ordinary Dividend Income Tax Rate	For Single Taxpayers	For Married Couples Filing Jointly	For Heads of Households
10%	Up to $10,275	Up to $20,550	Up to $14,650
12%	$10,276 to $41,775	$20,551 to $83,550	$14,651 to $55,900
22%	$41,776 to $89,075	$83,551 to $178,150	$55,901 to $89,050
24%	$89,076 to $170,050	$178,151 to $340,100	$89,051 to $170,050
32%	$170,051 to $215,950	$340,101 to $431,900	$170,051 to $215,950
35%	$215,951 to $539,900	$431,901 to $647,850	$215,951 to $539,900
37%	$539,901 or more	$647,851 or more	$539,901 or more

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Meanwhile, qualified dividends get taxed at the long-term capital gains tax rate. Here are the rates and income brackets for 2021:

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Data source: IRS.
2021 Qualified Dividend Tax Rate	For Single Taxpayers	For Married Couples Filing Jointly	For Heads of Households
0%	Up to $40,400	Up to $80,800	Up to $54,100
15%	$40,401 to $445,850	$80,801 to $501,600	$54,101 to $473,750
20%	$445,851 or more	$501,601 or more	$473,751 or more

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Here are the rates and income brackets for 2022:

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Data source: IRS.
2022 Qualified Dividend Tax Rate	For Single Taxpayers	For Married Couples Filing Jointly	For Heads of Households
0%	Up to $41,675	Up to $83,350	Up to $55,800
15%	$41,675 to $459,750	$83,350 to $517,200	$55,800 to $488,500
20%	$459,751 or more	$517,201 or more	$488,501 or more

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Because the IRS taxes nonqualified dividends at higher rates, investors should consider owning them in a tax-advantaged account like an individual retirement account (IRA). Although for higher-income individuals, there's certainly no harm in owning qualified dividend payers in tax-advantaged accounts to defer or avoid taxes on that income.

Dividend revenue in business

It's worth noting that there are different tax rules for dividends received by corporations. For example, the dividends received deduction (DRD) allows a company that receives a dividend from another company to deduct that payout from its income, which would reduce its income tax. However, several rules apply, and potential deductions range from 70% of the dividend to 100%.

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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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