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The IRS rules regarding classification of dividends as ordinary or qualified are complicated and it can be difficult for dividend investors to tell, before receiving a 1099-Div form, how their ...
Qualified dividends: These are dividends that are taxed at the capital gains tax rate (which is lower than the standard income tax rate). For a dividend to be considered a qualified payout, it ...
To be taxed at the qualified dividend rate, the dividend must: be paid after December 31, 2002; be paid by a U.S. corporation, by a corporation incorporated in a U.S. possession, by a foreign corporation located in a country that is eligible for benefits under a U.S. tax treaty that meets certain criteria, or on a foreign corporation’s stock that can be readily traded on an established U.S ...
Qualified dividend status can save you a lot of money because you’ll only pay the long-term capital gains rate on those payouts, instead of the ordinary income tax rate. Ordinary Dividends
This lower rate of tax also applies to qualified dividends from U.S. corporations and many foreign corporations. There are limits on how much net capital loss may reduce other taxable income. Total U.S. tax revenue as a % of GDP and income tax revenue as a % of GDP, 1945–2011, from Office of Management and Budget historicals
The qualified dividend tax rate was set to expire December 31, 2008; however, the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) extended the lower tax rate through 2010 and further cut the tax rate on qualified dividends to 0% for individuals in the 10% and 15% income tax brackets.
The shareholder may make one of two gain recognition elections (deemed sale and mark to market) or, if the shareholder is a corporation, a deemed dividend election. In each case, the gain or deemed dividend recognized under the election is subject to the tax and interest regime.
Dividends are one way for investors to earn income. Here’s how they work.