Qualified dividends are a type of dividend that receives preferential tax treatment in the United States. They are subject to lower tax rates than ordinary dividends, which are taxed at the same rate as an individuals ordinary income. To qualify for the lower tax rate, a dividend must meet certain criteria set by the IRS:
- The dividend must be an ordinary dividend, paid by a corporation in the U.S. or with certain ties to the U.S.
- The payee must own the stock for a long enough time, generally 60 days for common stock and 90 days for preferred stock.
The maximum tax rate for qualified dividends is 20%, with a few exceptions for real estate, art, or small business stock. The rates on qualified dividends range from 0 to 23.8% .
