Qualified dividends

A dividend qualifies if it comes from a US or qualified foreign corporation and you held the shares long enough. A foreign company counts if the stock paying the dividend trades on a US securities market. The company also counts if it is incorporated in a US possession or can claim an approved US income tax treaty. Dividends from a passive foreign investment company (PFIC) do not qualify.

Qualified dividends are stacked after your other taxable income, so some can be taxed at 0% and the rest at 15%. Ordinary dividends that do not qualify are taxed at ordinary rates, 10% to 37% for 2026. A fund’s capital gain distributions are taxed at long-term capital gain rates instead.

The holding period trips up quick trades. For common stock, you must hold the shares more than 60 days of the 121-day period that begins 60 days before the ex-dividend date. Count the day you sell, and leave out the day you buy. If you buy just before the ex-dividend date and sell within 60 days, the dividend is taxed at ordinary rates. Days you hedge the shares, as with a put option or a short sale, do not count. Some preferred stock needs more than 90 days of a 181-day period.

Some payouts called dividends are not qualified dividends. Credit union and savings bank “dividends” are interest. Most ordinary dividends from a REIT do not qualify. A mutual fund’s dividends qualify only as far as the fund designates them. Money market funds hold debt, so little or none of what they pay is qualified.