Not all dividends are created equal. Learn how to distinguish qualified dividends from ordinary dividends, understand their tax rates, and discover strategies to maximize after‑tax income.
Dividend income can be a powerful source of passive cash flow, but how much of it you keep depends on whether the IRS classifies it as qualified or ordinary. Understanding the rules can help you choose investments that are more tax‑efficient and align with your overall strategy.
Taxed at the preferential long‑term capital gains rates (0%, 15%, or 20%). To qualify, you must hold the stock for more than 60 days during the 121‑day period around the ex‑dividend date.
Taxed at your ordinary income tax rate – up to 37% (plus possible state taxes). This includes dividends from REITs, MLPs, and certain foreign corporations.
Switching from ordinary to qualified dividends can reduce your tax bill by double digits, especially for higher‑income earners.
See how much you could save if your dividends are qualified. Adjust your income, filing status, and dividend amount.
Adjust the values and click the button to see results.
This tool uses simplified 2024 tax brackets for ordinary income and long‑term capital gains. Qualified dividends are taxed at long‑term capital gains rates. Real results depend on your full tax situation.