William is single and had salary income from his position as Chief Financial Officer of Zippy Bank of $450,000 (the 39.6 tax bracket). He also had $35,000 in income from the dividends on the stock of his previous employer. What tax rate will apply to William's dividend income?
A) 15%
B) 20%
C) 35%
D) 39.6%

Question

Quizplus · Accepted Answer

The tax rate for qualified dividends is determined based on the taxpayer's tax bracket. Since William is in the 39.6% tax bracket for his salary income, his qualified dividends will also be taxed at the top tax bracket rate of 20%. Therefore, the correct answer is choice B.

William Is Single and Had Salary Income from His Position