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US dividend taxes for Americans abroad
US dividend tax rates depend on whether dividends are qualified or ordinary. For 2025, qualified dividends are taxed at 0%, 15%, or 20%, while ordinary dividends are taxed at the regular income tax rates. Some higher-income taxpayers may also be subject to the 3.8% Net Investment Income Tax if their income exceeds set thresholds.
The table below provides a quick comparison of how these dividend types are taxed.
US dividend tax rates (2025)
|
Dividend type |
Base US tax rate |
Maximum rate (with NIIT) |
|
Qualified dividends |
0% – 20% |
Up to 23.8% |
|
Ordinary dividends |
10% – 37% |
Up to 40.8% |
What is the tax percentage on US dividends?
The tax rate depends on how the dividend is classified and your taxable income.
- Qualified dividends are taxed at lower capital gains rates if they meet IRS requirements
- Ordinary dividends are taxed at standard income tax rates
Some higher-income taxpayers may also be subject to the 3.8% Net Investment Income Tax, which can increase the effective rate.
The key difference is classification. The same dividend can be taxed at a lower or higher rate depending on whether it qualifies for preferential treatment.
Are US dividends taxed the same for Americans abroad?
Yes, for US federal tax, but your country of residence may also tax the same dividends. The IRS applies the same rules no matter where you live. However, many countries also tax dividend income. That creates a layered result:
- US tax based on citizenship
- Foreign tax based on residency
What counts as a qualified dividend?
A dividend is qualified if it meets IRS rules on the issuer and holding period. In most cases, that means:
- The dividend comes from a US or an eligible foreign company
- You held the stock for more than 60 days within a 121-day window that begins 60 days before the ex-dividend date.
Need help reporting US dividends?
What are the 2025 qualified dividend tax rates?
Qualified dividends are taxed at 0%, 15%, or 20%, depending on your taxable income and filing status.
2025 qualified dividend tax rates
|
Filing status |
0% rate up to |
15% rate up to |
20% rate over |
|
Single |
US$48,350 |
US$533,400 |
Over US$533,400 |
|
Married filing jointly |
US$96,700 |
US$600,050 |
Over US$600,050 |
|
Married filing separately |
US$48,350 |
US$300,000 |
Over US$300,000 |
|
Head of household |
US$64,750 |
US$566,700 |
Over US$566,700 |
Key Takeaway: Many taxpayers fall into the 0% or 15% tax bracket for qualified dividends, depending on their taxable income.
What rate applies to ordinary dividends?
Ordinary dividends are taxed using standard federal income tax brackets, which range from 10% to 37%.
Ordinary vs qualified dividend tax treatment
|
Dividend type |
Tax treatment |
Typical rates |
|
Qualified dividends |
Capital gains rates |
0%, 15%, 20% |
|
Ordinary dividends |
Income tax rates |
10% to 37% |
|
Additional tax (if applicable) |
Net investment income tax |
3.8% |
Note: The additional 3.8% Net Investment Income Tax may apply if your income exceeds certain thresholds.
Can Americans abroad use the Foreign Earned Income Exclusion on dividends?
No, because dividends are not considered earned income under US tax rules. The FEIE applies only to income from work. Dividends come from investments, so they remain fully taxable under US rules. This is one of the more common misunderstandings among expats.
Can you claim a foreign tax credit on dividends?
Yes, in many cases, if your country of residence taxes the same dividend income. The Foreign Tax Credit can help reduce double taxation by offsetting US tax with foreign tax paid.
However, the rules are specific. The foreign tax must qualify and apply to the same type of income. Dividends are typically passive category income, so the credit must be matched within that category. Foreign taxes on other income generally cannot offset US tax on dividends.
How do you report US dividends on your tax return?
You report dividends on Form 1040, using the information provided on Form 1099-DIV. Schedule B may be required if dividends exceed certain thresholds.
1099-DIV explained: where to find your dividend tax details
Form 1099-DIV shows the key figures you need to report:
|
Box |
What it shows |
Why it matters |
|
Box 1a |
Ordinary dividends |
Total dividends taxed at regular income rates |
|
Box 1b |
Qualified dividends |
Portion of dividends eligible for lower tax rates |
These amounts are used when completing your Form 1040 and determining how your dividends are taxed.
When is Schedule B required?
You will usually need to file Schedule B if your ordinary dividends exceed US$1,500.
Do expats have additional reporting requirements?
Yes. Foreign financial accounts may trigger additional reporting, depending on your situation:
- FBAR (FinCEN Form 114): Required if your total non-US financial accounts exceed US$10,000 at any time during the year
- Form 8938 (FATCA): Required if your combined foreign financial assets exceed reporting thresholds
Example of US dividend tax for expats
A US expat earning $4,000 in qualified dividends may pay 0%, 15%, or 20%, depending on their income level. If the taxpayer falls into the 15% bracket, US$4,000 of qualified dividends would result in US$600 of US tax.
If the country of residence also taxes the dividend, a Foreign Tax Credit may reduce or eliminate the US liability. The final result depends on both systems, not just the US rate.
How does living abroad affect dividend taxation?
It does not change US tax rates, but it adds layers like foreign taxation, credits, and reporting requirements.
Expat factors affecting dividend taxation
|
Factor |
Effect |
Why it matters |
|
US citizenship |
US tax still applies |
Worldwide income is taxed |
|
FEIE |
Not applicable |
Dividends are unearned income |
|
Foreign tax credit |
May reduce US tax |
Helps avoid double taxation |
|
NIIT |
Still applies in some cases |
Based on income thresholds |
Frequently Asked Questions
Do reinvested dividends still get taxed?
Yes. Reinvested dividends are still treated as taxable income in the year they are received.
Are dividends from ETFs and mutual funds qualified?
Can dividends be taxed twice?
Does the location of my brokerage account affect tax rates?
Do small dividend amounts still need to be reported?
Prefer to talk it through? Schedule your free callback today.
Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.
