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For income, the tax rate is marginal (or "staggered"), meaning that the actual (effective) tax rate is not the same as the tax bracket you fall into. In other words, income "fills up" the lower tax brackets (which have a lower tax rate) before it moves to the higher brackets with higher rates.

This should be easy to answer but Google is not helpful: Do taxes on dividends work the same way? The transition from the 0% bracket to 15% bracket for dividends is $80,800 for 2021 (MFJ). If I earn $100 in dividends and my taxable income is $80,801, what is my tax rate on the dividend?

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  • The tax rate is marginal (from the Latin margo: edge). To modern Americans, it sounds odd; think instead of "stair-step". Your absolute tax rate is independent of your marginal tax rate (aka what tax bracket you fall into).
    – RonJohn
    Aug 12, 2021 at 18:03
  • You've earned $80,801, but what is your AGI (Adjusted Gross Income)?
    – RonJohn
    Aug 12, 2021 at 18:07
  • @RonJohn Let's assume my AGI is $80,801. I'll edit the question.
    – Nosjack
    Aug 12, 2021 at 18:16

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Yes, taxes on dividends work the same as regular income in terms of their marginal nature. For that matter, non-qualified dividends are treated exactly like regular income. Qualified dividends (which you're probably asking about) are treated like long-term capital gains, which means they are stacked on top of all other income, and use a different set of tax brackets that result in a lower tax. But they're still marginal.

I'm going to change your example to what I think you intended. Let's say you have a salary of $105,800 in 2021, plus $100 in qualified dividends, so an adjusted gross income (AGI) of $105,900. Married filing jointly so subtracting the $25,100 standard deduction gives you a taxable income of $80,800. The first $80,700 is taxed like normal. Then the $100 of qualified dividends fills up the 0% bracket, resulting in no extra tax. If you had $200 of qualified dividends instead, the extra $100 would spill into the 15% bracket, so it would add $15 to your total tax bill.

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