Investing
What is DRIP?
Dividend reinvestment plan
A dividend reinvestment plan automatically uses cash dividends to buy more of the same security instead of paying cash. Each reinvestment creates a new tax lot at the price on that date.
Reinvested dividends are generally taxable in the year received even though no cash was taken, and they raise the total cost basis of the holding. Failing to record them is a common and expensive error: it inflates the eventual reported gain, taxing the same money twice.
Where withholding applies to a cross-border dividend, the reinvested amount is the net figure, and the withheld portion has to be tracked separately for any relief claim.
Related
Definitions are educational and general. Nothing here is financial, legal or tax advice, and regulatory descriptions summarise frameworks that change — check the current rules for your jurisdiction before relying on them.