What Is a Qualified Dividend?

A qualified dividend is a type of payment that is made by a corporation to its shareholders. When this payment is received, the investor will have to pay capital gains tax, instead of regular income tax. In order to become a qualified dividend, a dividend payment has to meet several requirements. If it does not, it is known as an ordinary dividend and the investor will have to count it as regular income. Additionally, an investor is required to pay marginal tax rates, if it is an ordinary dividend.

One of the requirements that have to be met is the company issuing the dividend has to be an American company, or a qualifying foreign company. This type of dividend is generally not found with most international investments. The dividend is prohibited from appearing on the unqualified dividends list that is published by the IRS. Some companies do not fit into the category of being able to offer qualified dividends to their investors.

Another important requirement is that you have to hold a dividend for the required amount of time in order for it to qualify as a qualified dividend. This means that you have to hold it for least 61 days.

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