Stock investors make money in two ways. Ideally, the share price of the stocks they own goes up, giving them a profit when they sell. Some stocks also pay dividends to shareholders at regular intervals, giving them income that they can either reinvest in the stock or use for other purposes.
Depending on the type of account that holds your dividend-paying stocks, you might pay taxes on your dividend income. Below, we'll go into the details on how that income gets taxed and some of the preferential tax treatment that's often available for dividends.
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Source Fool.com