You get a stock dividend when a company pays you a dividend with extra shares of stock instead of cash. You usually don’t need to include these dividends in your taxable income.
When you receive a dividend, the total value (basis) of the stock doesn’t change. Instead, the basis of each share changes.
Stock dividends usually don’t have tax implications until you sell the shares. So, the amount paid in cash for the fractional share is considered taxable income. Report the sale of fractional shares on Form 8949.
To learn more, see the Fractional Shares tax tip.
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There are two different types of IRAs - traditional and ROTH. Use this IRA calculator from Betterment and H&R Block to determine which one is best for you.