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stephanieaparks

Question

Hello! If my dividends are used to buy company stock (not cash to me), do i have to pay taxes on that money?

Forum|Forum|2 years ago
October 8, 2023
1 reply
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TurboTax Live Deluxe Online

Employee

Was this reinvested dividends? Yes the Dividends are taxable. Then they bought more shares.

So be sure to add it to your cost basis when you sell the shares.

Unless it is in some kind of retirement account like a 401K or IRA. Then you should not get a 1099Div for it and it is not reported or taxable.

stephanieaparksAuthor

Yes, this is a 401K account. I have the dividends set up to buy more stock. I wouldn't sell the stocks for years from now. But thanks for the tip about cost-basis. Thaks for your help!

Employee

No. For 401K accounts you don't pay tax on dividends or any transactions inside the account. That's the benefit of a 401K account. It is all tax deferred until you take it out. You don't need to track the cost basis or anything. When you take a withdrawal it is all taxable as ordinary income. You don't get any capital gains treatment on it.