Dividend Tax Rates Explained: Qualified vs. Ordinary Dividends

Qualified dividends are taxed at 0%, 15% or 20% in 2026, depending on your taxable income, and ordinary dividends are taxed at your regular income rate, according to the IRS. A single filer pays 0% on qualified dividends while taxable income stays at or below $49,450, under Rev. Proc. 2025-32.

2026 qualified dividend tax brackets

Qualified dividends use the same thresholds as long-term capital gains. These are the amounts for taxable years beginning in 2026, and taxable income above the second column pays 20%.

For 2025 returns, the IRS lists $48,350 and $533,400 for single filers and $96,700 and $600,050 for joint filers.

Qualified vs. ordinary dividends: what the IRS cares about

The IRS says all taxable dividends are ordinary dividends, and qualified dividends are the subset that gets the lower rates. Your Form 1099-DIV splits them: box 1a is total ordinary dividends and box 1b is the qualified part. Payers have to identify which is which, so you don't need to work it out, though a holding period you didn't meet can still disqualify a dividend shown in box 1b.

Mutual fund and REIT capital gain distributions aren't qualified dividends, and neither are dividends from savings institutions that are really interest. Publication 550 has the full list.

The holding period requirement

For common stock, you must have held the shares more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. For preferred stock with dividends covering more than 366 days, it's more than 90 days during the 181-day period that begins 90 days before the ex-date. Buying just before the ex-date and selling soon after will miss it, and the dividend is then taxed as ordinary income.

Worked examples

A single filer with $2,000 of qualified dividends

With $40,000 of other taxable income, total taxable income of $42,000 stays under $49,450, so the $2,000 is taxed at 0% in 2026. With $60,000 of other taxable income, all $2,000 is above the 0% line and taxed at 15%, which is $300.

A single filer with the net investment income tax

The net investment income tax is 3.8% on the lesser of your net investment income or your modified adjusted gross income above the threshold. A single filer with $210,000 of modified adjusted gross income, including $25,000 of dividends, is $10,000 over the $200,000 threshold. The tax applies to the lesser figure, $10,000, which comes to $380.

Reinvested dividends and nondividend distributions

Reinvesting doesn't avoid tax: Publication 550 says you must still report reinvested dividends as income. A nondividend distribution, shown in box 3 of Form 1099-DIV, works differently. It isn't taxed when you receive it, but it lowers your cost basis, and once the basis reaches zero any further amount is a capital gain. Many funds with high yields pay some of this, so check your own form.

Filing: what you need to report

You should receive a Form 1099-DIV from each payer of at least $10 in distributions. You file Schedule B if you received more than $1,500 of ordinary dividends. Report dividends even if you don't receive the form.

Tax-advantaged accounts

According to Publication 590-A, amounts in a traditional IRA, including earnings and gains, generally aren't taxed until they are distributed. Inside one, a dividend isn't taxed the year it is paid, and the rules for what you pay on withdrawal are different. Your state may also tax dividends, on its own rules.

Sources

Checked on November 2, 2026. Tax rules and fund rules change, so check the current version before you act.

• IRS Rev. Proc. 2025-32, section 4.03, 2026 capital gain thresholds (Internal Revenue Bulletin 2025-45)
• IRS Topic 409, capital gains and losses, 2025 thresholds
• IRS Topic 404, Dividends
• IRS Publication 550, Investment Income and Expenses
• IRS Net Investment Income Tax
• IRS Publication 590-A, IRAs