Question

Sue received dividends from various corporate stock investments of $33,000 in 2020. Of these amounts, $29,000 were marked as "qualified dividends" on her Form 1099-DIV. Regarding qualified dividends, which of the following statements is / are correct?

Question 31 options:

	Qualified dividends are not subject to the federal income tax
	Qualified dividends are subject to tax, but may be deducted as a For AGI deduction on Form 1040
	Qualified dividends are subject to tax, but may be deducted as a From AGI deduction on Form 1040
	Qualified dividends are subject to tax, but are taxed at special tax rates depending on the taxpayer's overall taxable income

Answer 1

The correect answer for the question is Option D - Qualified dividends are subject to tax, but are taxed at special tax rates depending on the taxpayer's overall taxable income. This statement is true because Qualified dividends are taxed at special rates for the taxpayer. Generally qualified dividends are taxed at 0%, 15% or 20% rates . These rates are determined by the level of the income of the taxpayer and the tax bracket on regular income that he/she falls in. As such, this is the correct answer.

Option A is incorrect. Qualified dividends are subject to income tax and hence this option is not correct.

Option B is incorrect. This statement is not true. Qualified dividends are subject to tax but cannot be deducted for AGI as mentioned in this option.

Option C is incorrect. This statement is not true. Qualified dividends acnnot be deducted as a from AGi deduction. This statement is incorrect.

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