Ordinary dividends are taxed at the same rate as which type of income?

Ordinary dividends are taxed at the same rate as ordinary income. This is important to understand as it reflects how the tax code categorizes income types and the rates associated with them. Ordinary income includes wages, salaries, and other forms of income that are not subject to special rates or treatment. When individuals receive dividends from their investments, these dividends are considered ordinary income unless they qualify for preferential tax rates, such as qualified dividends.

In contrast, capital gains are typically taxed at different rates depending on how long the asset was held before sale, while passive income may include different types of earnings that are subject to specific tax treatments. Investment income is a broad category that includes various types of income, like interest and capital gains, which also do not have the same tax treatment as ordinary income. Understanding this classification is crucial for accurately preparing tax returns and optimizing tax liabilities.