How does taxation of foreign dividends work?

Taxation of foreign dividends in New Mexico works in accordance with the international tax laws of the United States. Specifically, foreign dividends are sourced to the investor’s residence, so if a resident of New Mexico receives foreign dividends from a foreign source, they are subject to the same taxes as any other type of dividend. Under the international tax laws of the U.S., foreign income from dividends is taxed at either 25% or the taxpayer’s applicable marginal tax rate, whichever is higher. This tax rate also applies to long-term capital gains from foreign sources. Any foreign tax paid on the dividends can be taken as a credit against the U.S. tax due. Additionally, all foreign-earned income must be reported on the IRS Form 1040. It’s important to note that some countries have tax treaties with the U.S. that provide for reduced tax rates on certain income received from residents of those countries. For example, a U.S. taxpayer may be able to take advantage of a reduced rate of 15% on dividends from a foreign country that has a tax treaty with the U.S. Additionally, there may be exemptions or credits available for foreign taxes paid on dividends. It’s important to research and understand all applicable tax treaties and other relevant tax laws in order to minimize tax liability.

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How does taxation of foreign dividends work?

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