-
@ chriso
2025-05-24 03:09:29
nostr:npub12r0yjt8723ey2r035qtklhmdj90f0j6an7xnan8005jl7z5gw80qat9qrx
How do I know if my dividends are qualified?
To be a qualified dividend, the payout must be made by a U.S. company or a foreign company that trades in the U.S. or has a tax treaty with the U.S. That requirement is simple enough to understand.
The next part gets tricky.
The 2003 tax cut was designed to reward patient, long-term shareholders. So, to qualify, you must hold the shares for more than 60 days during the 121-day period that starts 60 days before the ex-dividend date.
As a reminder, an investor must own the stock before the ex-dividend date to receive the next dividend payment.
If you're eyes are crossing, just think of it like this: If you've held the stock for a few months, you're likely getting the qualified rate. If you haven't, you're probably not, or at least not yet.
And there are certain types of stocks whose dividends are not considered qualified no matter what.
For example, real estate investment trusts (REITs) and master limited partnerships (MLPs) typically do not pay qualified dividends.
REIT dividends and MLP distributions have more complicated tax rules; however, in some cases, they might actually have lower effective tax rates.
Money market funds and other "bond-like" instruments generally pay ordinary dividends. So do dividends paid out in employee stock-option plans.
The good news: It's actually not your problem to figure this out if you really don't want to. Your broker will specify whether the dividends you received are qualified or not in the 1099-Div they send you at tax season.
But knowing whether you're being paid qualified dividends can help you plan properly. Perhaps you can arrange your dividend-stock portfolio such that your lower-taxed qualified dividends are paid into your taxable brokerage account and your higher-taxed ordinary dividends are paid into your IRA.
If all of this is making your head spin, we can summarize like this:
Most "normal" company stocks you've held for at least two months will have their dividends qualified. Many unorthodox stocks – such as REITs and MLPs – and stocks held for less than two months generally will not.