Qualified dividends, as defined by the United States Internal Revenue Code, are ordinary dividends that meet specific criteria to be taxed at the lower long-term capital gains tax rate rather than at higher tax rate for an individual's ordinary income. The rates on qualified dividends range from 0 to 23.8%. The category of qualified dividend (as opposed to an ordinary dividend) was created in the Jobs and Growth Tax Relief Reconciliation Act of 2003 – previously, there was no distinction and all dividends were either untaxed or taxed together at the same rate.[1]
To qualify for the qualified dividend rate, the payee must own the stock for a long enough time, generally 60 days for common stock and 90 days for preferred stock.
To qualify for the qualified dividend rate, the dividend must also be paid by a corporation in the U.S. or with certain ties to the U.S.
^Congressional Research Service. "The Taxation of Dividends: Background and Overview". www.everycrsreport.com. Archived from the original on 2018-06-09. Retrieved 2019-09-09.
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