What is the difference between qualified and nonqualified dividends?
For a dividend to be qualified, the mutual fund company must hold the shares for at least 61 days. If the shares are sold prior to 61 days and a dividend was paid during that time period, the dividend is considered nonqualified. Nonqualified dividends may be subject to your ordinary income tax rate. In addition, as a result of the Jobs and Growth Tax Relief Reconciliation Act of 2003, qualified dividends may receive the same low tax rates as long-term capital gain.
