Ah, yes, I can see how that would be confusing. I never bought into all the credit union jargon ("share," "share draft", etc.) so I forgot they pay "dividends"

Ah, yes, I can see how that would be confusing. I never bought into all the credit union jargon ("share," "share draft", etc.) so I forgot they pay "dividends" instead of "interest." In short, I believe this is the way it works: because credit union members are owners of the credit union, the profit paid to members are considered dividends by dictionary definition, however, the IRS considers them interest by their rules. Just like VA disability, getting a check from the government every month is obviously income, but the IRS doesn't consider VA disability income by their rules.