When companies choose to share a portion of their profits with the investors who own shares of the firm, those payments are called dividends, and they work generally the same way from company to company.

How Are Dividends Paid?

Typically, dividends are paid in cash, and they’re sent by the company directly to your brokerage, which will deposit the money into your account. Or many companies mail checks directly to investors who own shares in their firms. Alternatively, you might get dividends as additional shares of stock. Some companies and mutual funds offer the option of a dividend reinvestment plan (DRIP) that will automatically buy additional shares with your dividend payment.

What Is a Qualified Dividend?

Qualified dividends are taxed at a lower rate than ordinary dividends. They’re taxed at the long-term capital gains rate, which ranges from 0% to 20%. Most people won’t pay more than 15% on qualified dividends. As such, investors typically prefer to receive qualified dividends, but they’re the less common kind of dividend paid out.

What Is an Ordinary Dividend?

Any dividend that isn’t a qualified dividend is considered an ordinary dividend—and that’s most of them. In general, investors should assume that any dividend they receive is an ordinary dividend unless they’re told otherwise. The payer of the dividend is required to identify the type of dividend when they report them on Form 1099-DIV at tax time.

How Qualified and Ordinary Dividends are Reported at Tax Time

Generally, an investor will receive a Form 1099-DIV—“Dividends and Distributions”—from each institution or company that pays a dividend of $10 or more. This form reports your capital gains distributions, dividend and non-dividend distributions, and any taxes withheld from your payments during that tax year. Even if an investor does not receive a 1099-DIV from a company, they are still required to report any dividends on their tax return.

Starting a Business Credit Card

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

TLS 1.2 Encrypted

Equal Housing Lender

“Starting a Business Credit Card”

Ordinary vs Qualified Dividends

How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?

How Much Does a Firefighter Make a Year

Ideas for Making Money From Home

Budgeting Guide for Teens: 7 Tips to Build Better Money Habits

“Starting a Business Credit Card”

Ordinary vs Qualified Dividends

How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?

How Much Does a Firefighter Make a Year

Ideas for Making Money From Home

Budgeting Guide for Teens: 7 Tips to Build Better Money Habits

Student Loan Refinancing

Personal Loans

Online Investments

Other

Student Loan
Refinancing

Personal
Loans

Online
Investments