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Subject:  Re: tax-free dividends? Date:  10/21/2012  8:23 PM
Author:  TMFPMarti Number:  116823 of 127641

I was just reading a post on another site where the poster seemed to suggest that after holding a stock for 5 years, the dividends are tax-free. I thought dividends were never tax-free (except in a qualified distribution from a Roth account).

I just love it when everyone's wrong. I won't try to speculate as to what the other poster was thinking of or trying to say. As for you, through this year qualified dividends are not taxed at the Federal level if you're in the 15% bracket or lower. As for Roth distributions, there's no segregated creature going by "dividends." The closest you'll get is "earnings," but that could be any kind of earnings, including cap gains and interest.

Without a change in the law dividends go back to being taxed as ordinary income in 2013. As always, anything that goes on wholely under the IRA umbrella, including payment of dividends, has no current effect on your taxes.

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