Quick Definition

A qualified dividend is a type of dividend that meets specific criteria set by the IRS and is taxed at the lower capital gains tax rates rather than ordinary income tax rates.

Examples

• 1A company based in the U.S. pays a regular dividend to its shareholders, which is considered qualified because it meets the holding period requirements.
• 2An investor receives dividends from a preferred stock that qualifies for the lower tax rate due to the company being a qualified foreign corporation.
• 3A mutual fund that invests in U.S. stocks distributes dividends that are treated as qualified dividends, providing a tax advantage to the investors.

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