What is the taxation of foreign dividends?

Foreign dividends are money earned from foreign investments, such as stocks, bonds, or mutual funds. In Tennessee, foreign dividends are subject to taxation. Generally, foreign dividends are taxed as ordinary income, meaning they are taken into account when calculating total income. They may also be subject to an additional 3.8% net investment income tax. In addition to these taxes, foreign dividends may also be subject to what is called withholding tax. This is an income tax imposed at the source by the country where the investment is held. Some countries have treaties with the United States that provide for reduced or eliminated foreign withholding taxes. There are other taxes that may be imposed on foreign dividends, such as the Foreign Account Tax Compliance Act (FATCA) or the Qualified Intermediary Agreement (QI Agreement). Additionally, state and local taxes may be applicable, depending on the state or country in which you live. It is important to consult with a tax professional to determine what taxes may be imposed on foreign dividends you have earned. A professional can help you understand the rules and regulations and determine what taxes may apply to your particular situation. Having this information is crucial to understanding your tax obligations.

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