The ordinary dividends tax rate is the same as your regular income tax rate, from 10% to 37% in 2026, because non-qualified dividends are taxed like wages. Qualified dividends, by contrast, get the 0%, 15% or 20% capital gains rates. Your Form 1099-DIV shows total ordinary dividends in box 1a and the qualified portion in box 1b; the difference is taxed at ordinary rates. Here is how ordinary dividends are taxed, where they come from and how to reduce the tax, using 2026 figures from the IRS 2026 inflation adjustments.
Ordinary Dividends Tax Rate in 2026
| Rate | Single (taxable income) | Married filing jointly (taxable income) |
|---|---|---|
| 10% | Up to $12,400 | Up to $24,800 |
| 12% | $12,401 – $50,400 | $24,801 – $100,800 |
| 22% | $50,401 – $105,700 | $100,801 – $211,400 |
| 24% | $105,701 – $201,775 | $211,401 – $403,550 |
| 32% | $201,776 – $256,225 | $403,551 – $512,450 |
| 35% | $256,226 – $640,600 | $512,451 – $768,700 |
| 37% | Over $640,600 | Over $768,700 |
High earners may also owe the 3.8% net investment income tax on dividends when modified AGI exceeds $200,000 (single) or $250,000 (joint), which can bring the top federal rate on ordinary dividends to 40.8%. See the net investment income tax.
Ordinary vs. Qualified Dividends
| Non-qualified ordinary dividends | Qualified dividends | |
|---|---|---|
| 2026 federal rate | 10% to 37% | 0%, 15% or 20% |
| Form 1099-DIV | Box 1a minus box 1b | Box 1b |
| Holding period | None | More than 60 days in the 121-day period around the ex-dividend date (common stock) |
| Typical sources | REITs, money market funds, bond funds, short holdings | Most U.S. stocks and stock funds |
See qualified dividends for 2026 for the holding period rules and the 0% thresholds.
Where Ordinary Dividends Come From
- REITs: Most REIT dividends are ordinary, but qualified REIT dividends are eligible for a 20% Section 199A deduction, reducing the effective top rate. See how Section 199A dividends are taxed.
- Money market and bond funds: Interest earned by the fund is paid out as ordinary dividends.
- Short holding periods: Dividends on stock you did not hold long enough around the ex-dividend date.
- Some foreign companies that do not meet the qualified foreign corporation rules.
- Payments in lieu of dividends when your shares are loaned out in a margin account.
Other Boxes on Form 1099-DIV
- Box 2a, capital gain distributions: Taxed as long-term capital gains, not ordinary dividends.
- Box 3, nondividend distributions: A return of capital that is not taxed now but reduces your cost basis.
- Box 5, Section 199A dividends: REIT dividends eligible for the 20% deduction.
- Box 12, exempt-interest dividends: From municipal bond funds, generally free of federal income tax.
Our guide to Form 1099-DIV walks through every box.
Example: Ordinary Dividends Tax Rate in Action
A single filer with $70,000 of wages has taxable income in the 22% bracket. She receives $3,000 of REIT dividends, all non-qualified. At 22%, that would be $660 of tax. Because REIT dividends qualify for the 20% Section 199A deduction, only $2,400 is effectively taxed, for about $528. If the same $3,000 were qualified dividends from a stock fund, the 15% rate would apply, for $450.
How to Report Ordinary Dividends
- Report total ordinary dividends (box 1a) on Form 1040, line 3b, and qualified dividends (box 1b) on line 3a.
- If ordinary dividends from all sources exceed $1,500, list each payer on Schedule B.
- Reinvested dividends are still taxable in the year paid. Add them to your cost basis to avoid paying tax twice when you sell.
Strategies to Lower the Tax on Ordinary Dividends
- Asset location: Hold REITs, bond funds and high-yield funds in IRAs, 401(k)s or HSAs, where dividends are not taxed each year.
- Meet the holding period on stocks so their dividends qualify for lower rates.
- Consider municipal bond funds in taxable accounts if you are in a high bracket.
- Lower taxable income with pre-tax retirement contributions, which also reduces the rate on dividends.
- Pay estimated taxes if large dividend income is not covered by withholding.
Ordinary Dividends Tax Rate for Retirees
Retirees often fall in the 10% or 12% bracket, so the ordinary dividends tax rate can be modest. But dividend income has side effects. It counts toward combined income, so it can make more of your Social Security taxable. It also counts toward modified AGI for the new $6,000 senior deduction, which phases out above $75,000 ($150,000 joint), and toward the income used to set Medicare Part B and Part D surcharges two years later. Retirees with large taxable portfolios may benefit from holding income-producing investments inside their IRAs and favoring qualified-dividend stocks in taxable accounts. See how Social Security is taxed in 2026.
Dividends Paid to Children
Under the kiddie tax, a child’s unearned income above $2,700 in 2026 is generally taxed at the parents’ rate, so moving dividend-paying investments to a child’s name rarely saves much tax.
Frequently Asked Questions
How are ordinary dividends taxed in 2026?
Non-qualified ordinary dividends are taxed at your regular income tax rate, from 10% to 37%, plus the 3.8% net investment income tax for high earners.
Are ordinary dividends the same as qualified dividends?
No. Box 1a of Form 1099-DIV shows all ordinary dividends, including qualified ones. Only the qualified portion in box 1b gets the lower capital gains rates.
Are REIT dividends ordinary dividends?
Mostly, yes, but many are eligible for the 20% Section 199A deduction.
Do reinvested dividends get taxed?
Yes. Reinvested dividends are taxable in the year paid and increase your cost basis.
Final Thoughts
The ordinary dividends tax rate matches your income tax bracket, so placing high-yield, non-qualified investments in tax-advantaged accounts is one of the simplest ways to reduce tax on investment income. Check box 1a and 1b on your 1099-DIV, and use the Section 199A deduction on REIT dividends.
Have questions about how this applies to your situation? Book a free consultation with Aric and get answers from a CPA.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
