Qualified Dividend Definition & Requirements

Qualified Dividend Definition

Qualified dividends are monies received for investing in a stock paid out to the stockholder at a lower tax rate than normal dividends.  Qualified dividends were introduced in the Jobs and Growth Tax Relief Reconciliation Act of 2003.  Under this act the tax rate for qualified dividends was lowered from 20% to 15% and for individuals falling under the 15% tax bracket, the maximum tax allowed is 5% on the dividend.  These modified tax rates are good through January 1, 2011.

Requirements for Qualified Dividends

In order to be classified as a qualified dividend there are three requirements: (1) dividend must be from an American company or qualifying foreign company, (2) dividends are on the IRS approval list and (3) the holding period has been met.