Educational purposes only. This content does not constitute investment advice. Read our disclaimer
StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
A dividend that meets IRS requirements for a lower tax rate — taxed at capital gains rates (0-20%) instead of ordinary income rates.
Why It Matters
The difference between qualified and ordinary dividends can be huge at tax time. Qualified dividends are taxed at 0%, 15%, or 20% depending on your income bracket. Ordinary (non-qualified) dividends are taxed at your regular income rate — up to 37%. Most dividends from major U.S. companies are qualified, but REITs and short-term holdings usually pay ordinary dividends.
Key Points
- To qualify: stock must be held for at least 61 days during the 121-day period around the ex-dividend date
- Most U.S. company dividends are qualified; REIT dividends and money market dividends usually are not
- In tax-advantaged accounts (IRA, 401k), the qualified vs. ordinary distinction doesn't matter
Learn More
What Is a Dividend?
Get a complete explanation with examples, key takeaways, and a quiz to test your knowledge.
Related Terms
Common Questions
A dividend that meets IRS requirements for a lower tax rate — taxed at capital gains rates (0-20%) instead of ordinary income rates. The difference between qualified and ordinary dividends can be huge at tax time. Qualified dividends are taxed at 0%, 15%, or 20% depending on your income bracket.
The difference between qualified and ordinary dividends can be huge at tax time. Qualified dividends are taxed at 0%, 15%, or 20% depending on your income bracket. Ordinary (non-qualified) dividends are taxed at your regular income rate — up to 37%. Most dividends from major U.S. companies are qualified, but REITs and short-term holdings usually pay ordinary dividends.
To qualify: stock must be held for at least 61 days during the 121-day period around the ex-dividend date
Most U.S. company dividends are qualified; REIT dividends and money market dividends usually are not
In tax-advantaged accounts (IRA, 401k), the qualified vs. ordinary distinction doesn't matter