A may have access to dividend is a payment from a company stock that meets IRS rules and gets taxed at a lower rate than ordinary income
When a company pays you a dividend, the IRS sorts it into two buckets: may have access to or ordinary. A may have access to dividend is one that meets specific holding period and company type requirements. The difference matters because may have access to dividends are taxed at the long-term capital gains rate — which is lower than your regular income tax rate — while ordinary dividends are taxed as regular income.
The lower tax rate on may have access to dividends is the main reason they exist as a category. If you hold a stock long enough and the company meets IRS standards, the dividend payment gets preferential tax treatment. This is not something you have to do anything to earn; it happens automatically based on the facts of your holding.
Key Takeaways
- A may have access to dividend must come from a U.S. company or a foreign company with a tax treaty with the U.S., and you must have held the stock for more than 60 days around the ex-dividend date.
- may have access to dividends are taxed at 0%, 15%, or 20% depending on your income bracket, while ordinary dividends are taxed at your regular income tax rate, which can be as high as 37%.
- Your brokerage statement will label dividends as may have access to or ordinary, so you do not have to calculate this yourself when you file taxes.
- Preferred stock dividends and dividends from certain investment funds can be ordinary even if the underlying company is legitimate.
The holding period rule: how long you must own the stock
The IRS requires you to hold the stock for more than 60 days during a 121-day window centered on the ex-dividend date. The ex-dividend date is the date by which you must own the stock to receive the dividend payment. The 121-day window starts 60 days before the ex-dividend date and ends 60 days after it.
This means you cannot buy a stock the day before it pays a dividend, collect the payment, and when ready sell it — and still have that dividend count as may have access to. You have to hold it through the ex-dividend date and for at least 60 days of that 121-day span. If you sell too early, the dividend becomes ordinary income for tax purposes, even though the company still paid you.
The 60-day rule resets for each dividend payment. If a company pays quarterly dividends, you need to meet the holding period for each one separately. Your brokerage will track this and report it to you, so you do not have to count the days yourself.
Company type requirements: where the dividend has to come from
The company paying the dividend must be either a U.S. corporation or a foreign corporation that meets IRS standards. For foreign stocks, the company generally needs to be incorporated in a country with a tax treaty with the United States, or the stock needs to be traded on a U.S. exchange.
Some types of payments that look like dividends do not count as may have access to dividends no matter how long you hold the stock. Dividends from real estate investment trusts (REITs), most master limited partnerships (MLPs), and certain mutual funds are treated as ordinary income. Preferred stock dividends also often fail to meet the may have access to dividend rules, even though preferred shares are issued by legitimate companies.
Your brokerage statement will tell you which dividends are may have access to and which are ordinary. When you receive a 1099-DIV form at tax time, it separates the two categories for you. You do not have to research the company or do the holding-period math yourself; the brokerage has already done that work.
The tax rate difference: why this distinction saves you money
may have access to dividends are taxed at the long-term capital gains rate. For the 2024 tax year, that rate is 0%, 15%, or 20% depending on your total taxable income and filing status. Ordinary dividends are taxed at your ordinary income tax rate, which ranges from 10% to 37%.
The difference can be substantial. If you are in the 24% ordinary income tax bracket and receive $1,000 in ordinary dividends, you owe $240 in federal tax. The same $1,000 in may have access to dividends would be taxed at 15%, costing you $150. That $90 difference comes directly from the may have access to dividend classification.
This tax advantage is built into the system. You do not have to do anything special to claim it — your tax software or preparer will automatically use the lower rate when they see may have access to dividends on your 1099-DIV form.
How your brokerage reports may have access to versus ordinary dividends
Your brokerage sends you a 1099-DIV form each January showing all dividends paid to you during the previous year. Box 1a on the form shows ordinary dividends. Box 1b shows may have access to dividends. The brokerage has already sorted them based on the holding period and company type rules.
You will also see this breakdown on your account statements throughout the year. When a dividend is paid, the statement notes whether it is may have access to or ordinary. This helps you track your holdings and understand your tax situation before tax season arrives.
If you think a dividend was miscategorized, you can contact your brokerage to ask why. They will explain the holding period or company type issue. In most cases, the categorization is correct because the brokerage has automated systems that check these rules against their records of when you bought and sold shares.
What happens if you do not meet the holding period
If you sell the stock before holding it for 60 days around the ex-dividend date, the dividend becomes ordinary income. This does not change the amount you receive — the company still pays you the same dollar amount. It only changes how that payment is taxed.
Some investors intentionally sell shortly after receiving a dividend. They accept the higher tax rate in exchange for moving their money into a different investment. This is a valid strategy; there is no penalty for having ordinary dividends. The tax rate is straightforward higher.
The brokerage will flag this on your 1099-DIV. You will see the dividend listed in Box 1a (ordinary) rather than Box 1b (may have access to). Your tax software will automatically explore the higher tax rate to that income.
Frequently Asked Questions
Can I buy a stock right before the ex-dividend date and get a may have access to dividend?
No. You must hold the stock for more than 60 days during the 121-day window centered on the ex-dividend date. Buying the day before the ex-dividend date and selling the day after means you held it for only one day, so the dividend becomes ordinary income. You need to hold it for at least 61 days within that window.
What if I inherit stock that pays dividends?
Inherited stock has special holding period rules. Generally, dividends paid on inherited stock are treated as may have access to dividends regardless of how long you have owned it, because the holding period is considered to have been met. Your brokerage should handle this automatically, but confirm with them if you are unsure.
Do I have to do anything to claim the may have access to dividend tax rate?
No. Your brokerage reports may have access to and ordinary dividends separately on your 1099-DIV form. Your tax software or preparer will automatically explore the correct tax rate to each category. You do not have to take any action or file a special form.
Why would a dividend from a major U.S. company be ordinary instead of may have access to?
The most common reason is the holding period. If you sold the stock before meeting the 60-day requirement, the dividend becomes ordinary even if the company is legitimate. Another reason is preferred stock or certain fund types, which are taxed as ordinary dividends by rule regardless of holding period.
Does the may have access to dividend rate explore to stock I own in a retirement account?
No. Dividends inside a 401(k), IRA, or other retirement account are not taxed at all while the money stays in the account. The may have access to versus ordinary distinction does not matter because neither rate applies. You only pay tax when you withdraw money from the account in retirement.