The core difference: tax rates
may have access to dividends are taxed at the long-term capital gains rate, which is 0%, 15%, or 20% depending on your income. Non-may have access to dividends are taxed as ordinary income, which means they use the same tax brackets as your wages — ranging from 10% to 37% in 2024.
This difference matters because most people pay a lower rate on may have access to dividends than they would on the same dollar amount of non-may have access to dividends. A dividend taxed at 15% instead of 24% saves you real money at tax time.
The IRS does not automatically sort your dividends into these categories. Your brokerage will report them separately on Form 1099-DIV, but you need to understand which dividends you actually hold so you can report them correctly on your tax return.
Key Takeaways
- may have access to dividends use capital gains tax rates (0%, 15%, or 20%), while non-may have access to dividends use ordinary income tax rates (10% to 37%).
- A dividend qualifies only if you held the stock for more than 60 days during the 121-day window centered on the ex-dividend date.
- Dividends from most U.S. corporations and many foreign corporations can be may have access to; dividends from REITs, master limited partnerships, and certain other entities are always non-may have access to.
- Your brokerage reports may have access to and non-may have access to dividends separately on Form 1099-DIV, but you must verify the holding period yourself.
What makes a dividend may have access to for lower tax rates
A dividend becomes may have access to only when you meet two conditions at the same time: the dividend must come from a may have access to source, and you must have held the stock long enough.
The holding period rule is strict. You must own the stock for more than 60 days during a 121-day window. That window starts 60 days before the ex-dividend date (the date the stock price drops to reflect the upcoming dividend) and ends 60 days after it. If you sell the stock before 61 days have passed, the dividend does not may have access to, even if you held it for months before the ex-dividend date.
The source matters too. Dividends from U.S. corporations almost always may have access to. Dividends from foreign corporations may have access to only if the company is incorporated in a U.S. possession, trades on a U.S. exchange, or meets other specific conditions. Dividends from real estate investment trusts (REITs), master limited partnerships (MLPs), and certain other entities never may have access to, no matter how long you hold them.
Why brokerages sometimes get the holding period wrong
Your brokerage uses its records to determine whether you held a stock long enough, but those records only show what happened in your account. If you bought shares, sold them, and bought them again, the brokerage counts each purchase separately. If you held shares through a dividend payment and then sold them 30 days later, the brokerage may mark the dividend as may have access to because you owned the stock on the ex-dividend date — but you will not meet the 60-day rule.
The IRS expects you to catch these errors. When you file your tax return, you report the may have access to and non-may have access to amounts from Form 1099-DIV, but you are responsible for verifying the holding period. If the IRS audits you and finds you reported a non-may have access to dividend as may have access to, you owe back taxes plus penalties.
To verify the holding period yourself, check your brokerage statements for the purchase date and the ex-dividend date. Count forward 60 days from the ex-dividend date. If you still owned the stock on day 61, the dividend qualifies.
Tax brackets that determine your actual rate
Your may have access to dividend rate depends on which tax bracket you fall into, not on how much the dividend itself is worth. The IRS sets three may have access to dividend rates: 0%, 15%, and 20%.
The 0% rate applies to single filers with taxable income up to $47,025 in 2024 (married filing jointly up to $94,050). The 15% rate applies to income above those thresholds up to $518,900 for single filers (married filing jointly $583,750). The 20% rate applies to income above those amounts. These thresholds change each year.
Your ordinary income (wages, interest, non-may have access to dividends) fills up your brackets first. may have access to dividends sit on top of that. If your wages already pushed you into the 15% bracket, your may have access to dividends are taxed at 15%. If your wages alone exceed the 20% threshold, your may have access to dividends are taxed at 20%.
Non-may have access to dividends and your ordinary income tax rate
Non-may have access to dividends stack on top of your other income and are taxed at whatever rate applies to that combined total. If you earn $60,000 in wages and receive $5,000 in non-may have access to dividends, the IRS treats you as having $65,000 in taxable income and applies the tax rate for that amount.
This means non-may have access to dividends can push you into a higher tax bracket. A $5,000 non-may have access to dividend might be taxed at 22% instead of 12% if it crosses a bracket boundary. may have access to dividends do not have this effect as dramatically because they use their own rate structure.
Dividends that are always non-may have access to
Certain types of investments pay dividends that never may have access to, regardless of how long you hold them. Real estate investment trusts (REITs) always pay non-may have access to dividends. Master limited partnerships (MLPs) and publicly traded partnerships (PTPs) always pay non-may have access to dividends. Dividends from money market funds, bond funds, and other mutual funds that invest in bonds are non-may have access to. Dividends from S corporations and partnerships are non-may have access to.
If you own shares in a REIT for five years, the dividend is still taxed as ordinary income. If you hold an MLP for a decade, the distribution is still non-may have access to. The source of the dividend, not the length of ownership, determines whether it qualifies.
Some mutual funds that hold stocks will pay a mix of may have access to and non-may have access to dividends. The fund distributes may have access to dividends from the stocks it owns, but if the fund itself pays a dividend from its own gains or from interest income, that distribution is non-may have access to. Your Form 1099-DIV will break these out separately.
How to report each type on your tax return
Form 1099-DIV shows may have access to dividends in box 1b and non-may have access to dividends in box 1a. You report may have access to dividends on Schedule B (if you have more than $1,500 in interest and dividends) and then transfer them to Form 1040, line 7. Non-may have access to dividends go on the same line but are taxed as ordinary income.
If your brokerage reports a dividend incorrectly, you can correct it on your return. Attach a statement explaining the error and showing your calculation of the holding period. Keep your brokerage statements as proof. If you discover the error after filing, you can file Form 1040-X (amended return) to correct it.
Frequently Asked Questions
Can I hold a stock for 60 days total and still have the dividend may have access to?
No. You must hold the stock for more than 60 days during the specific 121-day window centered on the ex-dividend date. If you buy the stock 30 days before the ex-dividend date and sell it 31 days after, you have held it for 61 days total, but only 31 of those days fall within the required window. The dividend does not may have access to.
What if I bought the stock right before the ex-dividend date?
You cannot may have access to the dividend. You need to own the stock 60 days before the ex-dividend date to have enough time to meet the 60-day holding requirement. If you buy one day before the ex-dividend date, you can hold it for 60 days after and still miss the window.
Do I have to pay tax on non-may have access to dividends if I have no other income?
You still owe tax on non-may have access to dividends, but the standard deduction may cover some or all of it. For 2024, the standard deduction for a single filer is $14,600. If your non-may have access to dividends are $10,000, you owe tax only on the amount above the standard deduction. If they are $14,600 or less, you may owe no federal income tax.
Can I choose which dividends to report as may have access to or non-may have access to?
No. The IRS rules determine whether a dividend qualifies based on the source and your holding period. You cannot reclassify a non-may have access to dividend as may have access to to lower your tax bill. Your brokerage reports what it has on record, and you verify the holding period yourself.