HOw are dividends taxed?

Question

DO I have to pay tax for the dividends when I sell the stocks or is it taxed each year?

Answer 1

You pay taxes for dividends in the year they are distributed.

Answer 2

Dividends are taxed each year.  You will receive a 1099-DIV from your broker.

Answer 3

You pay tax on the dividends annually.  There are 2 types of dividends, Ordinary Dividends and Qualified Dividends.  Ordinary dividends are taxed as ordinary income.  Qualified Dividends are taxed at the lower long-term capital gains rate which is usually 15% but can be as low as 0% in 2009 and 2009.  The reduced LTCG rate will return to 5% in 2010.