Whats the difference between qualified dividends and nonqualified dividends?
Qualified dividends are ordinary dividends that are taxed at a 15% federal rate (or a 5% federal rate for taxpayers in the two lowest federal tax brackets). For a common stock dividend to be classified as a qualified dividend, you must have held that stock unhedged for at least 61 days out of the 121-day period that began 60 days before the ex-dividend date. For certain preferred stock, the relevant holding period is at least 91 days out of the 181-day period beginning 90 days before the ex-dividend date. Nonqualified dividends are ordinary dividends that are taxed at ordinary income rates.
