Dividend Income (Ordinary dividends & qualified dividends)

Updated on: Aug 6, 2018

Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation.


Most distributions are made in cash (check). However, distributions can consist of more stock, stock rights, other property, or services. Note that distributions of a company’s own stock or rights to this stock may not qualify as dividends.


The new tax law didn’t change the treatment of dividend income.

Previous (2017)

Dividends are a form of investment income a corporation may pay you if you own stock in that corporation. Dividends may additionally be received from ownership interest in a trust/estate, a partnership, or an S-corporation.


Dividends are usually paid in cash.


Dividends are taxed at either ordinary income rates or at lower long-term capital gains rate. Dividends taxed at ordinary income rates are called ordinary dividends. Dividends taxed at the lower long-term capital gains rate are called qualified dividends.


Qualified dividends are paid from stock held for more than a statutorily-mandated period. For more information, see Publication 550, Investment Income and Expenses.


If you own stock in a corporation which pays dividends over $10 annually, the corporation will send you an IRS Form 1099-DIV, Dividends and Distributions. This form should indicate whether the dividends are ordinary or qualified. See IRS Form1040 Instructions.


If you earn more than $1,500 in dividend income, you must fill in and attach an IRS Form Schedule B, Interest and Ordinary Dividends. Not all distributions are taxable. Some distributions are a return of your cost or basis. You won’t be taxed on those distributions until you recover your cost. For more information, see IRS Publication 550, Investment Income and Expenses.


The new tax law didn’t change the treatment of dividend income.