Qualified Dividend

DEFINITION of 'Qualified Dividend'

A type of dividend to which capital gains tax rates are applied. These tax rates are usually lower than regular income tax rates.

BREAKING DOWN 'Qualified Dividend'

Ordinary dividends that do not qualify for this tax preference are taxed at an individual's normal income tax rate.

In order to qualify:
1. The dividend must have been paid by an American company or a qualifying foreign company.
2. The dividends are not listed with the IRS as dividends that do not qualify.
3. The required dividend holding period has been met.

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RELATED FAQS
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    Dividend income is taxable but it is taxed in different ways depending on whether the dividends are qualified or nonqualified. ... Read Full Answer >>
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