Qualified Dividend
Definition
Dividend income taxed at lower capital gains rates (0%, 15%, or 20%) instead of ordinary income rates (up to 37%). Must hold stock for 60+ days around ex-dividend date. Most dividends from US corporations are qualified.
Why It Matters
Qualified dividend treatment is huge. Earning $5,000 in qualified dividends costs ~$750 in taxes (15% rate) instead of $1,700 in ordinary income (37% bracket). Long-term dividend investing is tax-efficient.
Example
Hold Microsoft paying 3% dividend equals $3,000 on $100k. Qualified dividend rate: 15% equals $450 tax. If same income from a 1099 job: $3,000 at 37% equals $1,110 tax. Dividend qualified status saves $660 annually.