In plain English
In the United States, some dividends are taxed at the same lower rates as long-term capital gains. These are qualified dividends. To qualify, the dividend generally has to come from a US company or a qualifying foreign company, and you must have held the shares for a minimum period around the ex-dividend date.
Example
Two investors receive $1,000 in dividends. If one is qualified and the other is not, the qualified one is usually taxed at a lower rate.
Why it matters
The tax treatment changes your after-tax income. Dividends from many REITs and some funds are usually not qualified.
Important
Tax rules differ by country and change over time. This page is general information, not tax advice. Check current rules or ask a qualified professional.
Common mistakes
- Assuming every dividend is taxed the same way.
- Selling too soon and missing the holding period.