Is dividends the same as capital gains? If not, what is the difference?
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2 Answers
They are different.
Dividends are profits of a company that are shared with stockholders.
Capital gains are the net profit you got from selling an investment.
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Excellant, thanks for the clear explaination. I needed to know whether I should lump together dividens from my company with gains from investing for tax purposes. I think you've made it clear that these two are different and therefore should not be lumped. Commented May 26, 2021 at 15:22
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2@CiaranWelsh No they should not - they often have different tax rates. Commented May 26, 2021 at 15:38
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2@CiaranWelsh BTW It is "Dividends" not "Dividens" at first I thought it was just a typo, but you have repeated that spelling 3-4 times now. Just wanted to make sure you saw that in case you wanted to look up more resources.– JohnFx ♦Commented May 26, 2021 at 15:44
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haha and this basically shows my level of experience which such things. Thanks for help. Commented May 26, 2021 at 15:51
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1@CiaranWelsh In the US, short-term capital gains are taxed at the same rate as ordinary income and dividends. Meanwhile, "qualified" dividends are taxed at the same rate as long-term capital gains. But you're still required to report these all separately. Is it confusing enough yet?– BarmarCommented May 27, 2021 at 14:44
A dividend represents a portion of a company’s earnings and the amount that you receive depends on the payout rate and the number of shares that you own.
A capital gain is the profit from purchasing a security at one price and selling it at a higher price.
An area of confusion for some is when a mutual fund makes a capital gains distributions at the end of the year. Some think of it as a dividend but it is not. It is the result the fund's realized capital gains from trading and these gains must be passed along to its shareholders.
answered May 26, 2021 at 14:46
