How Qualified Dividends Can Lower Your Tax Bill

A kind of payout that satisfies specific IRS criteria, qualified dividends are taxed at reduced long-term capital gains rates rather than higher ordinary income tax rates.

Here is what you should know:

• Dividends must be paid by a U.S. corporation or a qualified foreign entity to be considered eligible.
• Typically, you must have held the shares for more than 60 days within the 121-day period that begins 60 days before the ex-dividend date.
• Qualified dividends are generally reported in Box 1b of Form 1099-DIV.
• Depending on your taxable income and filing status, these dividends are taxed at 0%, 15%, or 20%.
• Compared to ordinary dividends, qualified dividends can significantly reduce your overall tax burden.
• Not all dividends qualify—dividends from some foreign companies, MLPs, and REITs may not meet eligibility.

Qualified dividends play a key role in tax-efficient investing due to their preferential tax treatment.

This entry was posted on Wednesday, April 9th, 2025 at 8:36 pm and is filed under Income. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.