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Depending on the type of dividend, qualified or nonqualified, you will be taxed at either your ordinary income tax bracket or the capital gains tax brackets, the latter of which is usually a lower tax rate.

Qualified dividends are reported on Form 1099-DIV in line 1b or column 1b. However, not all dividends reported on those lines may have met the holding period requirement. Those non-qualified dividends, as well as other ordinary dividends, may be taxed at your ordinary income tax rate, which can be as high as 37%.

What Is the Qualified Dividend Tax Rate? The qualified dividend tax rate for tax year 2022 — filing in 2023 — is either 0%, 15% or 20%. The rate you'll pay depends upon: Your filing status — single; married, filing jointly; married, filing separately; or head of household.

Ordinary dividends are payments a public company makes to owners of its common stock shares. It is their share of the company's profits and a reward for holding onto the shares. A qualified dividend is an ordinary dividend that can be reported to the IRS as a capital gain rather than income.

Qualified Dividend Example An investor buys 10,000 shares of a company on April 27 and then sells 2,000 of those shares on June 15. All shares are held unhedged at all times during the period. The ex-dividend date for the company was May 2.

Ordinary (Non-Qualified) Dividends Banks and thrifts that pay on deposits. Foreign corporations. Money market funds. Real Estate Investment Trusts (REIT), Master Limited Partnerships (MLP), Limited Liability Partnerships (LLP) and Employee Stock Ownership Plans.

The worksheet is for taxpayers with dividend income only or those whose only capital gains are capital gain distributions reported in box 2a or 2b of Form 1099-DIV that were received from mutual funds, other regulated investment companies, or real estate investment trusts.

In order to be a dividend to be qualifying, it must meet three requirements. It must be paid by the common stock of a U.S. company or a qualifying foreign company. It must not be exempt from qualifying dividend treatment ing to IRS rules. ... The required holding period for the stock has been met.