Are dividends and dividend reinvestments taxable?

Dividends are generally taxable and are reported on Form 1099-DIV. Dividends are classified as qualified and non-qualified and may be taxed at different rates depending on your tax situation. Dividend reinvestment itself is not taxable. However, when a reinvestment occurs it triggers a purchase or a buy transaction similar to buying a stock.

Reinvesting dividends will alter an investor's cost basis in a particular holding and those additional purchases may need to be reported to the Internal Revenue Service. Depending on how long the shares are held the gain or loss will be considered long term or short term for tax reporting purposes.