Qualified vs Ordinary Dividends: Holding Period Rule and 1099-DIV Boxes
Qualified vs Ordinary Dividends
Qualified dividends get lower US tax rates than ordinary dividends, but only if you hold the shares long enough. Enter your days held around the ex-date to check the holding period rule.
Qualified vs ordinary
| Qualified | Ordinary | |
|---|---|---|
| Federal rate | 0%, 15% or 20% (long-term capital gains rates) | Your regular income tax rate |
| Typical sources | Most US companies and many foreign ones, if held long enough | REITs, money market funds, bond interest, short holdings |
| In an IRA or 401(k) | Not taxed yearly | Not taxed yearly |
Form 1099-DIV boxes
| Box | Means |
|---|---|
| 1a | Total ordinary dividends (includes qualified) |
| 1b | The qualified part of 1a |
| 2a | Capital gain distributions from funds |
| 3 | Nondividend distributions (return of capital) |
| 7 | Foreign tax paid |
- Rules change. Check the current IRS Publication 550 or a tax professional for your situation.