Dividend Exclusion


DEFINITION of 'Dividend Exclusion'

A rule that allows corporations to subtract dividends received from income for tax purposes. Dividend exclusion is permitted for domestic corporations in the United States and allows for the exclusion of a percentage of dividend income received from other domestic corporations under income tax provisions.

BREAKING DOWN 'Dividend Exclusion'

Prior to the Tax Reform Act of 1986, individuals were also permitted to exclude a certain amount of dividends received from their taxable income. However, effective the following tax year (1987), this allowance was no longer permitted and individuals have since been taxed accordingly for dividend income received.

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  1. How often do mutual funds pay capital gains?

    The frequency with which mutual funds pay capital gains varies. However, funds that generate a profit within a given year ... Read Full Answer >>
  2. Can dividends be paid out monthly?

    Though it is more common for dividends to be paid quarterly or annually, some stocks do pay monthly dividends. Dividends: ... Read Full Answer >>
  3. Are dividends considered an asset?

    Whether dividends paid on stock are considered an asset depends on which role you play in the investment: the issuing company ... Read Full Answer >>
  4. Are dividends considered passive or ordinary income?

    Despite the fact that earning dividends requires no active participation on the part of the shareholder, they do not meet ... Read Full Answer >>
  5. Is dividend income taxable?

    Dividend income is taxable but it is taxed in different ways depending on whether the dividends are qualified or nonqualified. ... Read Full Answer >>
  6. How do dividends affect net asset value (NAV) in mutual funds?

    Distribution of dividends reduces the net asset value (NAV) of mutual fund shares. However, this doesn't mean that fund investors ... Read Full Answer >>

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