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Categories: General Tax Terms

Qualified Dividends are dividends that meet specific criteria set by the Internal Revenue Service (IRS) to be taxed at a lower capital gains tax rate rather than the higher ordinary income tax rate.

To qualify, the dividends must be paid by a U.S. corporation or a qualified foreign corporation, and the shareholder must have held the underlying stock for a specific period—typically, at least 61 days during the 121-day period that begins 60 days before the ex-dividend date.

For example, if an investor receives a dividend from a corporation in which they have held shares for the required time frame, that dividend may be classified as a qualified dividend, allowing the investor to benefit from the preferential tax treatment associated with capital gains.

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