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I have enough dividend income that I need to pay quarterly estimated taxes. When I look at my monthly statements, I'm not seeing any indication of which dividends are qualified vs not, but I need to figure that out since I expect my qualified dividends to be taxed at the 0% tax bracket vs 12% for my non-qualified dividends.

When estimating your quarterly taxes, do you generally just use some average rate (e.g. last year ~83% of my dividends were qualified) to determine which percentage of the dividends in each quarter to pay estimated taxes on, or is there a better way of estimating this?

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    If you don't trade in the dividend producing stocks then it shouldn't change year over year much. The reason you don't see it on the statements is because holding period is a factor, so it is calculated retroactively after the year end.
    – littleadv
    Jul 23, 2023 at 18:47
  • OK, so generally I can just assume it will be roughly the same % as the average for the whole year, or does the ratio of qualified to non-qualified change much from quarter to quarter?
    – Andrew
    Jul 23, 2023 at 18:59
  • It depends - check your prior statements. Some companies only give out dividends once a year, others do it quarterly or monthly.
    – littleadv
    Jul 23, 2023 at 19:07

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The nice thing about estimated tax payments is that they're only an estimate. You just need to guess high enough not to be penalized -- which, with the "safe harbor" rule, usually means that just sending a quarter of last year's taxes each quarter is more than good enough, if your taxable income/gains are anywhere close to what you pulled in last year.

Yes, if you're pulling in less money this year, that would be overkill, and you'd lose a bit of profit that you might have made if the money had stayed in your pocket rather than being on short-term zero-interest loan to the government. But my perception is that for many of us that won't be enough money to make much real difference.

Similarly, the penalty for undershooting your estimated taxes may not be large enough to make a huge amount of difference if your total tax bill isn't very large.

So my own take, for my individual taxes, is that it isn't worth my spending a lot of time on trying to get perfect. Glance at the income for the quarter, take a very rough guess at what taxes will be owed, and call it good enough.

If you've got much higher income than I -- if you're running a business rather than just living off your investments, or if you've cashed out a great deal this year for a major purchase, or something like that -- more precision is probably justified. But for dividends on total investments of less than (handwaving) US$5M, I suspect it isn't.

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