For a full understanding, see IRS Publication 550 for all the tax details you want. The federal government taxes unqualified dividends according to regular income tax rates and brackets. Net investment income tax is an additional 3.8% tax that applies to dividend income and realized profits. For example, if you're in the 27% tax bracket, you'll pay a 27% dividend tax on your unqualified dividends.
While unqualified dividends are taxed at a lower rate, there are still some cases where an investor will pay a higher tax rate on dividends, regardless of their type. If you open a Roth IRA, your money will be taxed now, but you won't pay any additional taxes when you retire. Another method is to open a tax-advantaged brokerage account, such as an IRA, where you can defer taxes paid until you are in a lower tax bracket when withdrawing funds from the account. Like other investment income, dividends may be subject to better tax rates than other forms of income if they meet the requirements in the eyes of the IRS.
If your dividends are ordinary (unqualified) dividends, they will be taxed at your marginal tax rate on regular income. You'll still have to pay taxes before or after you contribute the money, but you won't have to pay taxes as your savings grow in the account. One way to minimize the taxes that are paid on dividends is to try to have qualified dividends, those that incur a lower tax rate than unqualified dividends. This is true regardless of the investor's tax bracket, although the biggest savings are achieved by investors in the two upper brackets, where the difference in tax rates between the two types of dividends can reach up to 20%.
While unqualified dividends are taxed at the same rate as ordinary income, other dividends are taxed at a lower rate. Currently, the maximum tax rate for qualifying dividends is 20%, 15%, or 0%, depending on your taxable income and tax status. Your dividends would then be taxed at 15%, while the rest of your income would follow federal income tax rates.