What are qualified dividends?

FAQ: What are qualified dividends?

Answer: Most dividends paid by corporations, mutual funds or index funds are considered ordinary dividends, but some may be considered qualified dividends. In these cases, your dividend income is subject to the capital gains tax rate rather than your income tax rate.

Qualified dividends must be paid by an American corporation or a qualified foreign entity. In addition, you must have held the stock for which the dividend was paid for at least 60 days within the 121-day period that ends 60 days prior to the ex-dividend date. For example, if the ex-dividend date is December 1, then you must have owned the stock for at least 60 days during the period between June 3 and October 2.