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The Curious Bag
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Stock dividends are merely extra shares of the stock from the company stock that you already own. The amount of shares you receive depends on how many shares you already own.
Dividend Tax
Stock dividends are not taxable as long as they follow the traditional method of receiving extra stocks so that you have more stocks for less money. However, there are exceptions that make the dividends taxable.
Cash Dividend
If you choose to have your stock dividend turned into cash, then you must pay tax on that amount of cash. The tax amount is up to 15 percent and depends on your current tax bracket.
Preferred Stock
If you receive preferred stock shares for your stock dividend when other shareholders receive common shares, you must pay up to 15 percent tax on the preferred shares of stock.
Option Stock
If you are given the option to take a cash or stock dividend, you will have to pay tax if you choose the stock option at a 15 percent or less rate that depends on your tax bracket for the year.
Reporting
Dividends must be reported for amounts over $10. Any company for which you own stock should send you a 1099-DIV for the tax year. However, you must report dividends even if you are not sent a 1099-DIV.
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Dividends
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