Qualified Dividend

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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
  1. When does the holding period on a stock dividend start?

    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
  2. What is the average annual dividend yield of companies in the utilities sector?

    The average annual dividend yield for the utilities sector, as of January 2015, is approximately 4.8%, making it, along with ... Read Full Answer >>
  3. Does an ETF pay out the full dividend that comes with the stocks held in that ETF?

    Exchange-traded funds (ETFs) pay out the full dividend that comes with the stocks held within the funds. To do this, most ... Read Full Answer >>
  4. If I reinvest my dividends, are they still taxable?

    Cash dividends tend to fall into two broad tax categories: qualified dividends and ordinary dividends. However, some companies ... Read Full Answer >>
  5. Do penny stocks pay dividends?

    Because of the small market capitalization and revenues typical of most penny stocks, there are very few that offer dividends. ... Read Full Answer >>
  6. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>

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