Describe Qualified Dividends?

Answer 1

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

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.


http://www.irs.gov/newsroom/article/0,,id=120357,00.html

Answer 2

Qualified dividends are the ordinary dividends received in tax years beginning after 2002 that are subject to the same 5% or 15% maximum tax rate that applies to net capital gain. They are shown in box 1b of Form 1099 –DIV.
To qualify for the 5% or 15% maximum rate, all of the following requirements must be met:

1. The dividends must have been paid by a U.S. corporation or a qualified foreign corporation. (See qualified foreign corporation.)
2. The dividends are not of the type listed later under Dividends that are not qualified dividends.
3. The proper holding period is met (discussed next).

Holding periods

Generally, to meet the holding period requirement, a shareholder must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock will not receive the next dividend payment. Instead, the seller will get the dividend.