question.jpgIn Federal Income Tax

Do I have to pay taxes on dividends?

Yes. However, the tax rates on dividends has changed. As of 2003, qualified dividends received through 2008 are taxed at the new capital gains rate of 15%, if the regular tax rate for you is 25% or above. If your other income is taxed at 10% or 15%, then the rate that would apply to you is 5%. To qualify for these lower rates, the dividend must be paid by a US Corporation and the stock for which the dividend was received must have been held for 60 days during the 121-day period that comes before the dividend date. Short-term capital gains distributions, dividends from tax-exempt corporations, paid by an employee stock ownership plan, or payments received in lieu of dividends do not qualify for the lower tax rate.