 Here we are in our example, Form 1040. We populated using tax software. You don't need tax software to follow along, but it's a great tool to run scenarios with. You can also get access to the Form 1040 related schedules, related forms at the IRS website, irs.gov, irs.gov. Our starting point here, as normal, we've got the single filer, Mr. Anderson, no dependents, 100,000 on the W-2 income standard deduction after 12,950 to get us to the 87,050 taxable income. We're mirroring that over here on our tax worksheet, 100,000 up top standard deduction, 87,050. We're dependent on the software to calculate the tax on page two, which is 14774. This is gonna be a key point right here because when we look at qualified dividends, then we note that they might use something other than the progressive tax tables. So we wanna be able to kinda see that. So we'll get back to that shortly. So that's the 14994, 14, this should be 147774. That's what it should be, 14774. And then we have the 15,000 payments that bring us down to the 15,000 payments to the 226. Now, our major focus is gonna be recalculating the taxable income, but also we have to jump on over here to page two because there might be a different kind of set of formulas or tables that are gonna be used when we talk about dividend income when we have the qualified dividends. Okay, so let's go back to page one and add some dividend income. So notice that you're usually gonna get a 1099 div, something like that. The major focus when you get one is gonna be on the boxes one and two. So box one is usually gonna be all the dividends that you get box two then is not usually gonna be saying, look, these are dividends over and above you got in box one. They're saying that the dividends that are reported in box one A of those dividends, this is the qualified portion of them. That's the general kind of way to read that. And then again, you might have some of these other items down here as well, such as the total capital gain distribution, which is kind of like a distribution that was received, but it's not being categorized as a dividend because it didn't come out of the retained earnings and therefore needs to be populated as like a capital gain possibly on a schedule D instead. All right, so let's add some dividend income which is for the fun of it. We're gonna be over here on the first page of the form 1040, we're looking dividend income. So let's jump on up to a dividend income. See if I can just jump there like that. And I'll say this is corp one. Now remember that in practice, you might have somebody that is investing, most individual investors are gonna be investing in mutual funds oftentimes. If they're long-term investors and not like day traders and oftentimes much of their investment, it's gonna be under the umbrella of say an IRA or 401K plan in which case you might not get the dividend income because it might be part of under the umbrella of a retirement plan. My lifestyle is my retirement plan. So just remember, if you have normal people that have money in investments, you're gonna think about the reporting that might look a little bit different depending upon whether it's under the umbrella of a 401K or an IRA. If it's not under the umbrella of a 401K or an IRA and they have some investments that are not under that umbrella, then you would expect that you would get reports, 1099 div and interest and whatnot that would be showing the returns that they received from them. All right, so then we're gonna have the total dividends. Let's just start with the total dividends of let's say 1,000 here. And then let's say none of that is qualified. So let's say that would be like box one had 1,000 and box two no qualified items. So let's go back on over and say, all right, what does that do then? So now we've got the 100,000. We've got the dividends at 1,000. That brings us to the taxable income of 101. Standard deduction still at the 12,950 brings us to the total income or taxable income of the 8850. Let's mirror that on our return here. So I'm gonna go to my schedule B. Notice that schedule B wasn't populated yet because our dividends are below the threshold of 15,000. But over here, I'm still gonna call my tab the schedule B tab. I'm gonna go into the dividend areas, call it corp one, corp one, let's say and say we have the dividends of 1,000. So 1,000 on the dividends and that's gonna bring us to our total 1,000 which pulls over to page one, 101,000 and standard deduction is the same, 8850. And that brings us to the tax, which is now calculated. I'll depend on the computer to do that. Comes out to the 14,994. So 14,994, let's kind of compare that to what it was before. Let's put the old number here, 14774 and this is now gonna be the 14994. So then if I subtract this out, we had a 200, a 220 increase in the tax, a 200 and basically we had another $1,000. So if I had $1,000, I'm gonna say 220 divided by 1,000. If I make that a percent, that's like a 22% that was applied to the tax, right? Because it was a, and why would that be if I go back on over and I go to my tax summary and I look at my good old rates down here, the marginal rate, the highest rate is 22%. So it got taxed at ordinary income rates, the highest rate, not the average rate of the 22% because it wasn't a qualified dividend and it got taxed at the highest rate. Now let's say, okay, well, what if that dividend was all qualified? So now it was in box one and box two. So it's a qualified dividend, okay? So I'm gonna go, let's go back on over and say that 1,000 is here as well, so forms. So notice no change in terms of the total income. You got the 100,000, but now you do have it in the qualified dividend section on the left, still over here on the right and included to the total income. So no real change in the total income and no change in the standard deduction. We're still at the 88,050, just like we were before, but we're gonna come up to a different tax. So if I go to page two, now we're at 14,924. So last time, so now we're gonna say, we were at 14774 before and then if it was ordinary income, it was 14994 or non-qualified and now we're saying that it's at 14,924. So 14924. So 14924, hold on a second, is that the right number? 149, where did I get a seven from? Where'd you get that seven? Huh, huh, where'd that come from? Anyway, so now if I compare that to what it was before, the difference is 150,000, right? So 150,000 compared to that other $1,000, it's now being taxed at the 15% rate. So notice we have a different rate that is being applied over here. If I go to my taxes, you can kind of see that if I look at my little tax worksheet and you can go down here and I won't go through the whole thing, but it'll kind of go through it in a step by step and you can kind of see where the breakout of what that $1,000 is basically being taxed at the 15%, as opposed to what it was before, which I think was like the 22%.