How does dividend reinvesting impact my taxes? How are dividends that are reinvested taxed?

When you reinvest your dividends, you are really receiving a dividend and then buying additional shares of stock. So you pay income tax on the dividends that are paid to you, and the new shares that are purchased are nothing more than capital assets, just like the original stock purchased. If you hold these shares for a year or less before you sell them, you'll pay taxes on any gains at your marginal income tax bracket. But if you hold the shares for more than one year, any gain that you realize will be taxed at the preferred capital gains rates.