What is the difference between qualified and ordinary dividends?
Qualified dividends are paid by US corporations (or qualifying foreign ones) on stock held for a required period; they are taxed at the favorable long-term capital gains rates of 0%, 15%, or 20%. Ordinary (non-qualified) dividends are taxed at your regular income tax rates up to 37%.
What are the qualified dividend tax rates?
Qualified dividends are taxed at 0% if your taxable income is below about $47,025 (single), 15% up to about $518,900, and 20% above that. These thresholds mirror the long-term capital gains brackets and are indexed annually.
Do dividends trigger the net investment income tax?
Yes. Dividends are net investment income, so the additional 3.8% NIIT applies when modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly), on top of the regular dividend tax.
How do I make my dividends qualified?
To be qualified, you generally must hold the underlying stock for more than 60 days during the 121-day period around the ex-dividend date, and the payer must be a US corporation or qualified foreign corporation. Your broker reports qualified versus ordinary amounts on Form 1099-DIV.