Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates. The payer of the dividend is required to correctly identify each type and amount of dividend for you when reporting them on your Form 1099-DIV for tax purposes.

How do I know if my dividends are qualified or ordinary?

So, to qualify, you must hold the shares for more than 60 days during the 121-day period that starts 60 days before the ex-dividend date. If that makes your head spin, just think of it like this: If you’ve held the stock for a few months, you’re likely getting the qualified rate.

What are the tax requirements for a qualified dividend?

What is a ‘Qualified Dividend’. To qualify for the maximum tax rates of 0%, 15% or 20% that apply to long-term capital gains, qualified dividends must meet the following requirements, as outlined by the Internal Revenue Service ( IRS ):

How long do you have to hold shares for a qualified dividend?

The Holding Period. The IRS requires investors to hold shares for a minimum period of time to benefit from the lower tax rate on qualified dividends. Common stock investors must hold the shares for more than 60 days during the 121-day period that starts 60 days before the ex-dividend date.

Where are qualified dividends listed on a 1099-DIV?

Qualified dividends are listed in box 1b on IRS Form 1099-DIV , a tax form sent to investors who receive distributions during the calendar year from any type of investment. Box 1a on the form is reserved for ordinary dividends, which are the most common type of dividend paid to investors from a corporation or mutual fund, according to the IRS. 5

Who is Michael Boyle and what is a qualified dividend?

Michael Boyle is an experienced financial professional with more than 9 years working with financial planning, derivatives, equities, fixed income, project management, and analytics. What is a Qualified Dividend?