What is the difference between qualified and non-qualified dividends?

What is the difference between qualified and non-qualified dividends?

Qualified dividends are taxed at a lower rate, while non-qualified dividends are taxed as ordinary income.

Can you give me examples of each type of dividend?

Sure! Qualified dividends typically come from stocks held for more than 60 days, like those from U.S. corporations. Non-qualified dividends might come from REITs or certain foreign stocks.

How does the holding period affect the tax rate?

The holding period is crucial; if you hold a stock for less than the required time, the dividends are considered non-qualified and taxed at your ordinary income tax rate.

Are there any exceptions to these rules?

Yes, there are exceptions, such as dividends from certain mutual funds or those paid on employee stock options.