Do I have to pay tax on reinvested dividends?

Reinvested dividend plans allow you to buy more shares of stock in the corporation instead of receiving the dividends in cash. If you are in a reinvested dividend plan and you use your dividends to buy more stock at a price equal to its fair market value, you must report the reinvested dividends as income on your tax return. You should receive Form 1099-DIV from the payer.

If you are a member of a reinvested dividend plan that lets you buy more stock at a price less than its fair market value, you must report as income on your tax return the fair market value of the additional stock purchased with the reinvested dividends on the dividend payment date.

Other tax rules may apply.

Related tax information about reinvested dividends

Tax Directory Topics:
How do I report dividends?
How do I report dividends from my mutual funds?
Income Related Questions and Answers

IRS publications about reinvested dividends:
Additional information on reinvested dividends can be found in IRS Publication 550,

Investment Income and Expenses, and IRS Publication 564,

Mutual Fund Distributions. Also refer to Chapter 9 of IRS Publication 17,

Your Federal Income Tax. Please read this IMPORTANT Editor's Note regarding navigating IRS publications with Adobe Acrobat Reader.
IRS publications can also be ordered by calling 1-800-829-3676.

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