Dividend Tax Calculator 2016 Usa

How the Dividend Tax Calculator Works

The dividend tax calculator for 2016 USA helps you determine your tax liability on dividends received during that year. The calculation considers both federal and state taxes, as well as the distinction between qualified and non-qualified dividends.

The calculator uses the 2016 tax rates and brackets for both federal and state taxes. It also accounts for the fact that qualified dividends are taxed at a lower rate than non-qualified dividends.

Federal Tax Rates for Dividends

In 2016, the federal tax rates for dividends were as follows:

• Qualified dividends: 0%, 15%, or 20% depending on your ordinary income
• Non-qualified dividends: 0%, 15%, or 20% depending on your ordinary income

The tax rate for qualified dividends depends on your total ordinary income. If your ordinary income is below $38,600 (single filer) or $77,200 (married filing jointly), the qualified dividend tax rate is 0%. If your ordinary income is between $38,600 and $427,650 (single filer) or $77,200 and $479,000 (married filing jointly), the rate is 15%. For higher incomes, the rate is 20%.

Non-qualified dividends are taxed at the same rates as qualified dividends, but they are not eligible for the lower tax rates.

State Tax Rates for Dividends

State tax rates for dividends vary by state. In 2016, some states did not impose additional taxes on dividends, while others had their own tax rates. For example:

• California: 1.5% on net investment income (which includes dividends)
• New York: 3.0625% on net investment income
• Texas: No additional tax on dividends

Note that some states may have different tax rates for different types of dividends or may have additional taxes on capital gains.

Qualified vs. Non-Qualified Dividends

Qualified dividends are those paid by US corporations that meet certain criteria, including:

• The stock must be held for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date
• The stock must be held for a total of at least 61 days during the 121-day period
• The dividend must be paid by a US corporation that has held at least 20% of its stock for at least 30 days out of the 60-day period ending on the ex-dividend date

Non-qualified dividends do not meet these criteria. They are typically taxed at the same rates as qualified dividends, but they are not eligible for the lower tax rates.

Example Calculation

Let's say you received $5,000 in dividends in 2016, with $3,000 being qualified dividends and $2,000 being non-qualified dividends. Your ordinary income for the year was $40,000.

First, we calculate the federal tax on the non-qualified dividends:

Next, we calculate the federal tax on the qualified dividends. Since your ordinary income is below $38,600, the qualified dividend tax rate is 0%:

Total federal tax on dividends = $300 + $0 = $300

Now, let's calculate the state tax. Assuming you live in California, the state tax rate is 1.5% on net investment income:

Total tax on dividends = $300 (federal) + $75 (state) = $375