What are Ordinary Dividends?
Ordinary Dividends are payments you receive as a shareholder, from the earnings and profit of a company or a mutual fund. In other words, if you invest in a share of a stock and that stock makes a profit, the corporation will issue you a dividend payment.
There are two forms of ordinary income; business, and personal income. Business income is profit from a company through daily proceeds. However, personal income is collecting profit from investing.
Every company that pays you more than $10 will report the total annual payment on an income statement. You can find them in Box 1a on Form 1099-DIV.
How are ordinary dividends taxed, you may ask.
They are subject to tax the same as overall income. If your tax bracket is 25% then your ordinary dividends are also taxed at 25%. Nonetheless, ordinary dividends have a higher tax rate than Qualified Dividends.
Schedule B
Ordinary Dividends are typically reported on a Schedule B. For example, this tax form reports the following,
- Taxable interest or ordinary dividends exceeding $1,500
- The interest you receive from a seller-financed mortgage and the buyer used the property as a personal residence
- Accrued interest from a bond
- The original issue discount (OID) less than the amount on Form 1099-OID
- If you are reducing the interest income on a bond by the amount of an amortizable bond premium (paying the premium over the face value of a bond)
- Claiming the exclusion of interest from Series EE or U.S. Savings bonds (issued after 1989)
- You are a nominee
- Or you had a financial interest in or working with foreign accounts and trusts
Read more about what are qualified dividends here.
