How Qualified Dividends Work and Why the Tax Rate Matters

What may have access to dividends are

A may have access to dividend is a payment from a company to a shareholder that meets specific rules set by the IRS, which determines how it gets taxed. Most dividends from U.S. corporations and certain foreign corporations may have access to. The key difference: may have access to dividends are taxed at the long-term capital gains rate (0%, 15%, or 20% depending on your income), while non-may have access to dividends are taxed as ordinary income at your regular tax bracket rate, which can be as high as 37%.

Whether a dividend qualifies or not depends on two things: the type of stock that paid it and how long you held the stock before the payment date. You do not have to do anything to "make" a dividend may have access to — it either meets the IRS rules or it does not. Your brokerage or the company paying the dividend will tell you which dividends are may have access to on your tax documents.

Key Takeaways

may have access to dividends are taxed at capital gains rates (0%, 15%, or 20%), while non-may have access to dividends are taxed as ordinary income at rates up to 37%.
To may have access to, you must have held the stock for at least 60 days during the 121-day window surrounding the dividend payment date.
Dividends from U.S. corporations and most foreign corporations in developed countries typically may have access to, but dividends from REITs, master limited partnerships, and some other investments do not.
Your brokerage reports may have access to and non-may have access to dividends separately on Form 1099-DIV, which you use when filing taxes.

The holding period requirement

You cannot straightforward own a stock on the day it pays a dividend and have that payment be may have access to. The IRS requires you to hold the stock for a minimum period around the payment date. Specifically, you must own the stock for at least 60 days during a 121-day window that starts 60 days before the ex-dividend date.

The ex-dividend date is the cutoff set by the stock exchange — if you buy the stock on or after this date, you do not receive that particular dividend payment. The 121-day window runs from 60 days before the ex-dividend date through 60 days after the payment date. If you sell the stock before meeting the 60-day holding requirement, that dividend becomes non-may have access to.

There is one exception: if you held the stock through a corporate reorganization or merger, some or all of your holding period may carry forward to the new stock, depending on the type of transaction. Your brokerage can tell you whether your holding period qualifies in these situations.

Which stocks and funds pay may have access to dividends

Dividends from shares of U.S. corporations almost always may have access to, as long as you meet the holding period. Dividends from foreign corporations also may have access to if the company is incorporated in a U.S. possession or if its stock is traded on a U.S. exchange and the country has a tax treaty with the United States. Most major international companies meet this standard.

Dividends that do not may have access to include those from real estate investment trusts (REITs), master limited partnerships (MLPs), mutual funds that hold primarily bonds, and certain preferred stocks issued before a specific date. Dividends from money market funds and bond funds are also non-may have access to. If you own a mutual fund or exchange-traded fund (ETF), the fund itself will break down which portion of its distributions are may have access to and which are not.

Some dividends are partially may have access to. A mutual fund might distribute 60% may have access to dividends and 40% non-may have access to dividends in a single payment. The fund reports this split on Form 1099-DIV, and you report each portion separately on your tax return.

How the tax rate is determined

Your tax rate on may have access to dividends depends on your total taxable income for the year, not on how much dividend income you received. The IRS sets three brackets for may have access to dividends: 0%, 15%, and 20%. The income thresholds change each year and differ based on your filing status (single, married filing jointly, head of household, and so on).

For 2024, the 0% rate applies to single filers with taxable income up to $47,025 and married filers filing jointly 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 thresholds are adjusted annually for inflation.

Your ordinary income (wages, interest, non-may have access to dividends) fills up your brackets first, and may have access to dividends fill the remaining space. This means you might pay 0% on some may have access to dividends and 15% on others, depending on where your total income lands. A tax professional or tax software can calculate this for you based on your specific situation.

Reporting may have access to dividends on your tax return

Your brokerage sends you a Form 1099-DIV by January 31 each year, showing all dividends paid during the previous year. The form separates may have access to dividends (reported in Box 1b) from non-may have access to dividends (reported in Box 1a). If you received dividends from multiple brokerages, you will receive multiple 1099-DIV forms.

When you file your tax return, you report may have access to dividends on Schedule B (Interest and Ordinary Dividends) if your total dividends and interest exceed $1,500, or directly on Form 1040 if they do not. may have access to dividends then go on Schedule D (Capital Gains and Losses), where they are taxed at the preferential rates. Non-may have access to dividends stay on Schedule B and are taxed as ordinary income.

If your brokerage incorrectly reports a dividend as may have access to when it should be non-may have access to (or vice versa), you can correct it on your return by noting the adjustment. Keep your own records of holding periods and dividend dates in case the IRS questions the classification.

The difference between may have access to dividends and capital gains

may have access to dividends and long-term capital gains are taxed at the same rates (0%, 15%, or 20%), but they are different types of income. A capital gain is profit from selling an asset for more than you paid for it. A dividend is a payment a company makes to shareholders from its earnings or reserves, whether or not you sell the stock.

You can have a capital loss and may have access to dividend income in the same year. Capital losses can offset capital gains dollar-for-dollar, and any remaining loss can offset up to $3,000 of ordinary income (including non-may have access to dividends). may have access to dividends cannot be reduced by capital losses — they are taxed separately at the preferential rate.

Frequently Asked Questions

Can I lose the may have access to dividend status if I sell the stock right after the payment date?

No. Once the dividend is paid, its tax status is locked in. The holding period rule applies to whether you receive the dividend at all (the ex-dividend date), not to what happens after payment. You can sell the stock the day after the dividend arrives and the dividend remains may have access to, as long as you held it for 60 days during the required window.

What if I bought the stock, held it 30 days, sold it, then bought it again before the ex-dividend date?

The holding periods do not add up. You must hold the same shares for 60 days during the 121-day window. If you sell and repurchase, the clock restarts. Buying the stock again before the ex-dividend date does not help — you need 60 days of continuous ownership around that date.

Do I have to report non-may have access to dividends differently on my tax return?

Yes. Non-may have access to dividends are reported on Schedule B as ordinary income and taxed at your regular tax bracket rate. may have access to dividends go on Schedule D and use the preferential capital gains rates. Your brokerage separates them on Form 1099-DIV, so you report each type in its correct location on your return.

If a mutual fund holds stocks that pay may have access to dividends, are the fund's distributions automatically may have access to?

Not necessarily. The fund must hold the underlying stocks long enough to receive may have access to dividends, and you must hold the fund shares long enough. A fund can distribute non-may have access to dividends even if the stocks it owns paid may have access to dividends. The fund's prospectus or annual report shows what portion of distributions are typically may have access to.

Does the holding period reset if a company splits its stock?

No. A stock split does not interrupt your holding period. If you owned 100 shares for 40 days and the stock splits 2-for-1, you now own 200 shares with a 40-day holding period. The time you held the original shares counts toward the 60-day requirement for the new shares.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.