What Is the Difference Between Ordinary & Qualified Dividends?

Dividends refer to payments made to by companies to investors based on how many shares they own. Dividends can be issued on a regular basis or as one-time distributions.

Time Frame

You must have owned the stock for at least 60 of the 121 days surrounding the ex-dividend date for the stock.

Source

In order to count as a qualified dividend, the dividend must be paid by an American company or by a qualified foreign corporation.

 

Non-Qualified Dividends

Certain types of dividends are not eligible for qualified distribution treatment, including dividends from regulated investment companies that do not meet certain criteria, real estate investment trusts and dividends that are paid on employer securities.

 

Significance

Ordinary dividends are taxed as regular income. Qualified dividends are taxed at lower capital gains tax rates.

 

Reporting

On your form 1099-DIV, your total dividends will be listed in box 1a. The portion of your total dividends that are qualified will be listed in box 1b of form 1099-DIV.

 

References

About the Author

Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."