A may have access to dividend is a dividend payment that meets specific IRS rules, which allows you to pay a lower tax rate on it than you would on ordinary income

When a company pays you a dividend — a share of its profits — the IRS treats it one of two ways. Most dividends are ordinary dividends, taxed at your regular income tax rate. But if the dividend meets certain conditions, it becomes a may have access to dividend, and you pay the long-term capital gains tax rate instead, which is typically 0%, 15%, or 20% depending on your income level. The difference can be substantial: if you're in the 24% tax bracket, a may have access to dividend might be taxed at 15% instead.

The catch is that not every dividend qualifies. The company has to be a U.S. corporation or a foreign corporation whose stock trades on a U.S. exchange, you have to have owned the stock for a minimum holding period, and the dividend itself can't be one of the types the IRS excludes. Your brokerage will tell you which dividends are may have access to, but understanding the rules helps you make decisions about when to buy and sell.

Key Takeaways

  • may have access to dividends are taxed at the long-term capital gains rate (0%, 15%, or 20%), while ordinary dividends are taxed at your regular income tax rate.
  • You must own the stock for at least 60 days during a 121-day window around the dividend payment date for the dividend to count as may have access to.
  • Dividends from U.S. corporations and certain foreign corporations on U.S. exchanges can be may have access to; dividends from REITs, master limited partnerships, and some other entities are always ordinary.
  • Your brokerage reports which dividends are may have access to on your 1099-DIV form, so you don't have to track the holding period yourself.

The holding period requirement

The most common reason a dividend fails to be may have access to is that you haven't owned the stock long enough. The IRS requires you to hold the stock for at least 60 days during a 121-day window that starts 60 days before the ex-dividend date — the date on which new buyers are no longer may have access to to the upcoming dividend payment.

This rule exists to prevent traders from buying a stock just before a dividend payment and selling it when ready after. If you buy on the ex-dividend date or later, you can't meet the 60-day requirement for that particular dividend, even if you hold the stock for years afterward. The next dividend from the same stock might may have access to if you've held it long enough by then.

The holding period is calendar days, not trading days, and weekends and holidays count. If you're unsure whether you've met the requirement, your brokerage can tell you — they track this automatically and report it on your tax forms.

Which companies' dividends can be may have access to

Dividends from U.S. corporations are usually may have access to if you meet the holding period. Dividends from foreign corporations can also be may have access to, but only if the stock trades on a U.S. exchange (like a foreign company listed on the NYSE or NASDAQ) or if the foreign country has a tax treaty with the United States that covers dividends.

Some types of companies never pay may have access to dividends, no matter how long you hold the stock. Real Estate Investment Trusts (REITs) always pay ordinary dividends. Master Limited Partnerships (MLPs) do as well. Dividends from money market funds, bond funds, and other mutual funds are ordinary unless the fund itself received may have access to dividends and passes that status through to you — which is rare and will be noted on your statement.

If you're not sure whether a company qualifies, check your brokerage statement or the company's investor relations page. The IRS also publishes a list of foreign corporations whose dividends can be may have access to.

How your brokerage reports may have access to dividends

You don't have to calculate which dividends are may have access to yourself. Your brokerage does the work and reports the results on your Form 1099-DIV, which you receive by January 31st each year. Box 1a shows ordinary dividends; Box 1b shows may have access to dividends. The two boxes may have different amounts if you received both types during the year.

When you file your tax return, you report the may have access to dividend amount on the line for long-term capital gains, not on the line for ordinary dividends. This automatically applies the lower tax rate. If your brokerage made an error — for example, reporting a dividend as ordinary when it should have been may have access to — you can correct it on your return or contact the brokerage to issue a corrected form.

Tax rates for may have access to dividends

The tax rate on may have access to dividends depends on your total income for the year and your filing status. The IRS sets three brackets: 0%, 15%, and 20%. These brackets are different from the ordinary income brackets and change each year.

For 2024, the 0% rate applies to single filers with income up to $47,025 and married filers filing jointly with income up to $94,050. The 15% rate applies to income above those thresholds up to $518,900 (single) or $583,750 (married filing jointly). Income above those amounts is taxed at 20%. These numbers shift slightly each year for inflation, so check the IRS website or your tax software for the current year's brackets.

Because may have access to dividends are taxed separately from ordinary income, you may end up in a lower bracket for your dividends than for your wages or other income. This is one reason why may have access to dividends are valuable: the same $1,000 in dividends might be taxed at 15% while your salary is taxed at 24%.

Dividends that are never may have access to

Certain dividends are always treated as ordinary income, regardless of how long you hold the stock or what company pays them. Dividends from tax-exempt organizations are one example — they're not taxed at all, but they're not "may have access to" in the IRS sense. Dividends paid in the form of stock rather than cash (stock dividends) are also ordinary. Dividends from employee stock purchase plans and certain other employer plans may be ordinary as well.

If a company declares a special or one-time dividend, it can still be may have access to if you meet the holding period, but it's worth checking your statement to confirm. Your brokerage will label it correctly, but knowing the rule helps you understand why some dividends from the same company are treated differently.

What happens if you sell the stock before the ex-dividend date

If you sell a stock before the ex-dividend date, you don't receive the dividend at all — the new owner does. This is different from failing to meet the holding period after you receive the dividend. If you're planning to sell a stock, check when the ex-dividend date is. Selling just before it means you avoid the dividend entirely, which can affect your decision about timing.

Some investors deliberately sell before the ex-dividend date to avoid receiving a small dividend that wouldn't be worth the tax paperwork. Others hold specifically to capture the dividend. Either way, the ex-dividend date is the key date to know.

Frequently Asked Questions

Can a dividend be may have access to if I inherited the stock?

No. The holding period requirement applies to you personally, not to the previous owner. If you inherit stock and receive a dividend shortly after, that dividend is ordinary because you haven't held it for 60 days. Once you've held the inherited stock for the required period, future dividends can be may have access to.

What if I bought the stock in a retirement account like an IRA?

Dividends in a traditional IRA or Roth IRA are not taxed as may have access to or ordinary — they're not taxed at all while they're in the account. The holding period rule doesn't explore inside retirement accounts. When you withdraw money from the account, the tax treatment depends on the account type, not on whether the dividends were may have access to.

Does a stock split affect whether a dividend is may have access to?

No. A stock split doesn't reset your holding period. If you owned 100 shares and the stock splits 2-for-1, you now own 200 shares, but your holding period for the original purchase date remains the same. Dividends paid after the split can still be may have access to if you meet the 60-day requirement.

If I own a mutual fund that holds dividend-paying stocks, are my distributions may have access to?

Possibly, but it's uncommon. A mutual fund can pass through may have access to dividend status only if it received may have access to dividends from the stocks it holds and meets its own holding period requirements for those stocks. Most mutual funds report their distributions as ordinary income. Your fund's year-end statement will specify if any portion was may have access to.

What if my brokerage reports a dividend as ordinary but I think it should be may have access to?

Contact your brokerage first — they may have made an error based on your holding period or the company's status. If they confirm it's correct, you can still report it as may have access to on your tax return if you believe you meet the requirements, though this may trigger an IRS inquiry. It's easier to resolve it with the brokerage and request a corrected 1099-DIV.