What are qualified dividends?

Qualified dividends are dividends taxed at the capital gains rate tax. In most cases, the capital gains rate tax is lower than the ordinary individual income tax.

There are several criteria dividends need to meet to qualify for this type of tax preference. To qualify, the required dividend period should have been met and the dividends must have been paid by a United States company or an approved foreign company. The holding period requirement is more than 60 days during the 121-day period beginning 60 days before the reinvestment date. Moreover, the dividends should not be on the IRS list of dividends that do not qualify.