What is the tax rate for dividends?

In Virginia, the tax rate for dividends is a little complex. Generally speaking, qualified dividends (for example, most dividends from domestic and qualified foreign corporations) are taxed at the same rate as long-term capital gains at the federal level. That means for individuals in the 10%, 12%, 22%, 24%, and 32% income tax brackets, the tax rate on the dividend income is 0%. For individuals in the 22%, 24%, 32%, 35%, and 37% income tax brackets, the rate on qualified dividends is 15%. For those in the highest individual tax bracket (37%), the rate on qualified dividends is 20%. In addition, there is a Virginia state tax rate of 5.75% for qualified dividends reported on federal Form 1040, Line 3b. However, there is no tax on dividends from Virginia corporations. For individuals who receive nonqualified dividends (dividends from corporations other than domestic and qualified foreign corporations), the tax rate is the same as the taxpayer’s marginal tax rate. For example, if you are in the 22% bracket, the rate on nonqualified dividends would be 22%. The Virginia state tax on nonqualified dividends reported on federal Form 1040, Line 3b is also 5.75%. In summary, qualified dividends are taxed at the same rate as long-term capital gains, while nonqualified dividends are taxed at the same rate as your marginal tax rate. In either case, Virginia imposes an additional state tax of 5.75%.

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What is the tax rate for dividends?

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