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Can I add qualified dividends?

Your question:

I know I can add tax-exempt interest on the 1040 Line 8b in addition to the taxable interest on Line 8a. Is that true for the qualified dividends on Line 9b?

Linda says:

You are right about the interest. The only caveat is that tax-exempt interest on Line 8b could include pass-through from a k-1. If it does, you are likely to run into k-1 pass-through elsewhere in the tax return. When you get the k-1, you can spot the tax-exempt pass-through.

I am sorry to say that the same cannot be said for qualified dividends.Qualified dividends on 1040 Line 9b is a subset of dividends and taxed differently. This is why the tax preparer has to segregate it. However, the dividends on Line 9a include all of the dividends including the qualified dividends.

Qualified dividends must

  • be paid by a U.S. company
  • on stock held for a minimum period of time
  • not meet one of the exceptions

Okay, so I fibbed. There is one more place to find dividends…on 1040 Schedule D on Line 13. They are called capital gain distributions and, again, are taxed differently. If there is a significant amount on Schedule D, Line 13 I usually put it on the ‘dividends’ line of my cashflow worksheet and explain its source.

Keep digging for dollars!

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at www.LendersOnlineTraining.com, she speaks at banking associations on risk management, lending and director finance topics.