How Dividends Are Taxed

Dividends can be taxed at low long-term rates or at ordinary income rates, depending on the type and how long you held the stock. Here is the difference between qualified and ordinary dividends. General education, not tax advice.

Qualified vs. ordinary

Qualified dividends are taxed at the same 0%, 15% or 20% rates as long-term capital gains. Most dividends from U.S. companies, and many foreign ones, qualify if you meet a holding period. Ordinary dividends, which do not qualify, are taxed at regular income rates up to 37%.

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