Spillover Dividend

It’s Christmastime, and you just heard about the special, one-time dividends you’re getting. Hooray!

Even better: it’s a spillover dividend. Even though you heard about it in December, it’s not getting paid to you until January. Which means that it counts as income for that January-year, not that December-yesteryear.

Spillover dividends are dividends that are announced in one year, but paid in the next. Extra hoorays for spillover dividends, since they count only toward next year’s taxes. You get the dividend in January, but you don’t have to pay taxes for another year and a quarter...all the way until April tax-time the following year. Booyah, baby.

Who’s to thank for your spillover dividend? Well, the company for one, but also the stock exchange if there’s one involved, since there are rules about dividends and dates for each stock exchange.

The company paying out the spillover dividends likely still has to pay taxes on those for this year, not next year. Because rules.

Bummer...but at least they’re getting it out of the way now.