Los Angeles Investment Club, Real Estate Blog

Qualified Dividends

Posted by Daniel Nase, MBA

Find me on:

Jun 16, 2014 8:29:00 PM


When we talk about qualified dividends, what comes to many minds is some form of payment from a bank for a checking or savings account. The question is; what is a dividend? Well, simply put, a dividend is a form of payment by which a corporation pays their shareholders or stockholders. In most cases, dividends are given out whenever there is a surplus profit apart from the corporation’s reinvestment activities. Depending on the type of dividend which is usually defined by being qualified or unqualified, dividends can be accessed by an individual, partnerships, cooperatives, investors or companies. Other types of dividends include cash dividends, stock dividends, property dividend, scrip dividend and liquidating dividend.

Qualified dividends are very popular in the stock market today because retirees like stable income and generally have most of the wealth in the nation. For the stock and property dividends, property owners or investors have not only established a huge impact, but also a significant contribution in the way they are taxed. This means most investors who seek payments in the form of dividends have expert knowledge on how different types of dividends operate unless they are just investing at their local bank.

The tax rates on qualified divs are usually lower than regular income tax rates. Most regular dividends from US corporations are qualified. For individuals, estates and trusts, qualified dividend tax at the current capital gains rate of 15%. For individuals whose income tax rate is 10% or 15%, then the capital gains tax rate is zero.


  • Must be paid from a US corporation as the result of owning stock in the company.
  • Must be a minimum holding period of 60 days. 

Dividends paid by a corporation or mutual funds to investors that qualify are reported in box 1b on the form 1099-DIV.

Retention period for qualified divs

Although the holding period is the same whether you obtain a dividend for shares you hold like a stock or in a mutual fund during the tax year, even if the dividend itself is qualified an investor may not take advantage of a lower tax rate since reporting to the IRS is often incorrect. For the investor to measure up for the tax rate reduction, a fund or a mutual fund must have been possessed by the investor for a period of at least 60 days during a period of two months before and after the ex-dividend date. If an investor owns preferred stock, the parts must be heeded for at least 90 days out of the 181 period centered by the ex-dividend date.

What investors need to know about qualified dividends

Well, everything has its positive and negative side. An investor should always remain in touch with his or her broker as a means of gaining insight into how their portfolio is performing. Predictions can even be made for the expected future performance like dividend payouts on a particular stock.



Topics: Qualified Dividend

About Our Blog

Our program is beautifully designed to help you make money every month, simple to use and powerful. As a member of Los Angeles Investment Club you are putting your money to work for you, and taking the first step towards financial freedom. If you like what we have to say, don't be shy, we can help you a lot more one-on-one.

Subscribe to Email Updates